Posted by candy on .
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).
Municipal bonds expected annual yield = 5%.
High Growth common stocks expected annual increase in market value = 10%; expected dividend yield = 0.
The yield on the munis will be the after-tax yield also: 5%
The after-tax yield on the non-dividend-paying growth common stocks, if held long enough to qualify for long term capital gains tax rate of 15%, would be 10% (1 - 0.85) = 8.5%
I now need the high growth common stocks - expected annual increase in market value= 10% ; expected dividend yield = 0
I answered that already