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Do you work hard to achieve good grades, but does not get success at that level? Studentwhiz has found out a simple yet interesting way to help its students achieve good grades by learning in a smart way through University of Phoenix Harper is considering three alternative investments of $10,000. Assume that the Solutions and Harper is considering three alternative investments of $10,000. Assume that the Course. Our main motive is that our students should pass their exams with flying colors. Harper is considering three alternative investments of $10,000. Assume that the Study Material and Harper is considering three alternative investments of $10,000. Assume that the Guide are also been provided so that students can learn from them. On our learning portal you will get study material which is 100% updated and imparted by our experts.

Harper is considering three alternative investments of $10,000. Assume that the

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Harper is considering three alternative investments of $10,000. Assume that the taxpayer is in the 28% marginal tax bracket for ordinary income and 15% for qualifying capital gains in all tax years. The selected investment will be liquidated at the end of five years. The alternatives are:

  • A taxable corporate bond yielding 5% before tax, and the interest can be reinvested at 5% before tax.
  • A Series EE bond that will have a maturity value of $12,200 (a 4% before-tax rate of return).
  • Land that will increase in value.

The gain on the land will be classified and taxed as a long-term capital gain. The income from the bonds is taxed as ordinary income. How much must the land increase in value to yield a greater after-tax return than either of the bonds? Given: Compound amount of $1 and compound value of annuity payments at the end of five years:

Interest Rate

$1 Compounded for 5 Years

$1 Annuity Compounded for 5 Years

5%

1.28

5.53

4%

1.22

5.42

3.6%

1.19

5.37

Land should increase in value by 5% annually to yield a greater after-tax return than either of the bonds.

 
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