You have been offered the following opportunity: receive a tax 'forbearance' credit of $10,000 today. (For...

 

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You have been offered the following opportunity: receive a tax 'forbearance' credit of $10,000 today. (For example, instead of paying your $50,000 tax bill, you can pay $40,000) In return, you must make higher tax payments of $1,000 per year for the next 15 years. The first of the annual payments will come in one year's time. If you think of this like a loan (you have more $ now than you would otherwise, but have to make future payments instead), what is the annual rate of return you are paying? | You have been offered the following opportunity: receive a tax 'forbearance' credit of $10,000 today. (For example, instead of paying your $50,000 tax bill, you can pay $40,000) In return, you must make higher tax payments of $1,000 per year for the next 15 years. The first of the annual payments will come in one year's time. If you think of this like a loan (you have more $ now than you would otherwise, but have to make future payments instead), what is the annual rate of return you are paying? |

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