Personal Business Concepts

Bernie and Pam brittten are a young couple beginning careers and establishing a household. They will each make about $50,000 next year and will have accumulated $40,000 to invest, they now rent an apartment but are considering purchasing a condominium for $100,000. If they do they are requred to have $10,000 down payment. Their friend is a investment advisor who has suggested these following investments. The condominium - expected annual increase in market value = 5%. Municipal bonds - expected annual yield = 5%. High-yield corporate stocks - expected dividend yield = 8%. Savings account in a commercial bank - expected annual yield = 3%. High-growth common stocks - expected annual increase in market value = 10%; 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? Explain your answer.

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