Bill is a restaurant manager that falls into the 25% marginal bracket and pays an additional 5% for state taxes. He has invested 20,000 in corporate bonds which is currently earning a annual return of 7.5%. What is the after tax return on bill's corporate bonds for the year?

To calculate Bill's after-tax return on his corporate bonds, we need to consider his marginal tax rate and the state taxes he pays. Here's how you can calculate it step by step:

1. Calculate the total taxes Bill pays:
- Multiply Bill's investment in corporate bonds ($20,000) by the annual return on the bonds (7.5%) to find his total earnings from the bonds.
Total earnings = $20,000 * 7.5% = $1,500
- Multiply the total earnings by Bill's marginal tax rate (25%) to find his federal taxes.
Federal taxes = $1,500 * 25% = $375
- Multiply the total earnings by the state tax rate (5%) to find his state taxes.
State taxes = $1,500 * 5% = $75
- Calculate the total taxes by adding the federal and state taxes.
Total taxes = Federal taxes + State taxes = $375 + $75 = $450

2. Calculate the after-tax return:
- Subtract the total taxes from the total earnings to find the after-tax return.
After-tax return = Total earnings - Total taxes = $1,500 - $450 = $1,050

Therefore, the after-tax return on Bill's corporate bonds for the year is $1,050.