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Holding Period: Calculate the pretax and after-tax HPR on Jill Clark's investment.

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Jill Clark invested $25,000 in the bonds of Industrial Aromatics, Inc. She held them for 13 months, at the end of which she sold them for $26,746. During the period of ownership she received $2,000 interest. Calculate the pretax and after-tax HPR on Jill's investment. Assume that she is in the 31% ordinary tax bracket (federal and state combined) and pays a 15% capital gains rate on dividends and on capital gains for holding periods longer than 12 months.

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Solution Summary

The solution explains how to calculate the holding period return.

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Holding period return is independant of the time period and is calculated as
HPR = (Final Price - Initial Price + Income)/Initial Price
Excluding taxes
Final ...

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