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Suppose you invest $100,000 in a mutual fund for 10 years. The fund earns6% pretax per year, makes no annual distributions (and thus there is noincome to be taxed each year) and you sell the fund at...

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Suppose you invest $100,000 in a mutual fund for 10 years. The fund earns6% pretax per year, makes no annual distributions (and thus there is noincome to be taxed each year) and you sell the fund at the end of the 10years. You pay a 20% tax on capital gains and a 40% tax on ordinaryincome.What is the pre-tax total dollar accumulation at the end of 10 years?What is the after-tax total dollar accumulation at the end of 10 years?Suppose instead you invest the $100,000 in preferred stock paying 6% perannum with the dividend taxed at 20% per year (as dividends receive theirown tax preferred rate).What is the after-tax total dollar accumulation at the end of 10 years?
Answered Same Day Dec 27, 2021

Solution

Robert answered on Dec 27 2021
112 Votes
Suppose you invest $100,000 in a mutual fund for 10 years. The fund earns6% pre-tax per year,
makes no annual distributions (and thus there is no income to be taxed each year) and you
sell the fund at the end of the 10years. You pay a 20% tax on capital gains and a 40% tax on
ordinary income. What is the pre-tax total dollar accumulation at the end of 10 years? What is
the after-tax total dollar accumulation at the end of 10 years? Suppose instead you invest the
$100,000 in prefe
ed stock paying 6% per annum with the dividend taxed at 20% per year (as
dividends receive their own tax prefe
ed rate).What is the after-tax total dollar accumulation at
the end of 10...
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