Question: Problem 5.30 Caroline Weslin needs to decide whether to accept a bonus of $1,810 today or wait two years and receive $2,070 then. She can

Problem 5.30

Caroline Weslin needs to decide whether to accept a bonus of $1,810 today or wait two years and receive $2,070 then. She can invest at 6 percent. Congress and the president have decided to increase the Federal tax rate in an effort to reduce the budget deficit. Suppose that Caroline Weslin will pay 35 percent of her bonus to the Federal government for taxes if she accepts the bonus today and 40 percent if she receives her bonus in two years. Will the increase in tax rates affect her decision?

Yes / No ___________ it will / will not affect __________ her decision. She will Accept / Decline __________ The bonus today.

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