Question 3.3: If the building owner is in the 28 percent tax bracket, dete...

The composite interest rate can be determined using Eq. (3.15):

θ=\frac {(1-t) i-λ}{1+λ}=\frac {(1-0.28)* 0.07-0.04}{1+0.04}=0.01

sing Eq. (3.10) with P = $10,000 and N = 10, the investment will accumulate to the total amount F:

F=P(\frac {1+i}{1+λ})^{N}=P(1+\frac {i-λ}{1+λ})^{N}

F = $10,000 * (1+ 0.01)^{10} = $11,046