Fed Taxes
4.A client has asked you to analyze the following investment alternatives for the highest after-tax rate of return under the assumption that the client is subject to a 28% marginal federal income tax and a 5% state income tax.
• A corporate bond with a 7% pretax return
• An out-of-state municipal bond with a 5.75% pretax return
• An in-state municipal bond with a 5.5% pretax return.
5.Your financial planner has just completed an analysis of your fixed-income holdings. She has determined each of your after-tax yields, but is cautioning you that the tax implications of your holdings could change if Congress changes marginal tax rates. Based on the following after-tax yields, which of these bonds would offer the greatest after-tax return if your federal marginal tax bracket increased from 25% to 30%, while your state marginal bracket remained 4.5%? • A corporate bond with a 5.1% after-tax return • An out-of-state municipal bond with a 5.0% after-tax return • An in-state municipal bond with a 4.8% after-tax return
11 years ago
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Your financial planner has just completed an analysis of your fixed-income holdings
NOT RATED11 years ago