GMAT Practice Question: If the amount of federal estate tax due on an estate valued at 1.35 million USD is 437,000USD...
Question
If the amount of federal estate tax due on an estate valued at 1.35 million USD is 437,000USD plus 43 percent of the value of the estate in excess of 1.25 million USD, then the federal tax due is approximately what percent of the value of the estate?
- 30 %
- 35 %
- 40 %
- 45 %
- 50 %
Topics: word problems, percentages, translations
Solution
Step 1
We create a variable for the estate value in millions, and we translate "estate valued at 1.35 million USD" into an equation.
E = 1.35
Step 2
We translate "tax due ... is 437,000 USD plus 43 percent of the value of the estate in excess of 1.25 million USD" into a formula, converting 437,000 USD to 0.437 million USD.
T = 0.437 + 43/100 (E - 1.25)
Step 3
We calculate the tax amount in millions using the formula.
T = 0.437 + 0.43 (1.35 - 1.25) T = 0.437 + 0.43 0.10 T = 0.437 + 0.043 T = 0.480
Answer
35%
