The condominium - expected annual increase in market value = 2%.
Municipal bonds - expected annual yield = 3%.
High-yield corporate stocks - expected dividend yield = 5%.
Savings account in a commercial bank-expected annual yield = 1%.
High-growth common stocks - expected annual increase in market value = 6%; expected dividend yield = 0.
Calculate the after-tax yields on the foregoing investments, assuming the Brittens have a 28% marginal tax rate (based on Public Law 108-27, The Jobs and Growth Tax Relief Reconciliation Act of 2003).
How would you recommend the Brittens invest their $40,000?
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Analysis of investments
Condominium Municipal Bonds High-Yield Corporate Stocks Savings Account High-growth Common Stocks
Increase in market value 2% 0 0 0 6%
Expected annual yield 0 3% 0 1% 0
Expected dividend yield 0 0 5% 0% 0
Total expected yield 2% 3% 5% 1% 6%
Calculate the after-tax yields on the foregoing investments in this case.