| Name: |
| Kate and Sam Smith Investment Opportunities |
| Here are the three different investment opportunities you have identified for the Smiths, all with the same amount of risk: |
|
| 1. |
Taxable corporate bonds that pay 4.75 percent interest annually. |
|
| 2. |
A high-dividend stock that pays 4 percent dividends annually but has no appreciation potential. |
|
| 3. |
Tax-exempt municipal bonds that pay 3.5 percent annually. |
| Kate and Sam have a marginal tax rate of 30 percent (capital gains rate of 15 percent). |
|
|
| Investment Choice |
Computation |
After-Tax Return |
|
| 1. |
Corporate Bond |
|
| 2. |
High-dividend stock |
|
| 3. |
Municipal bond |
| Here are the three basic tax planning strategies, and the features of taxation each of them exploits: |
vaalerys
WritingProject-Week1SmithInvestmentOpportunities.xls
