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    after-tax yields

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    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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    Solution Preview

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    ANSWERS
    Please see attached file for answers.

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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%
    Tax ...

    Solution Summary

    Calculate the after-tax yields on the foregoing investments in this case.

    $2.19

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