Complete the two annual after-tax rates of return columns

Reference no: EM13905653

Alan inherited $100,000 with the stipulation that he "invest it to financially benefit his family." Alan and Alice decided they would invest the inheritance to help them accomplish two financial goals: purchasing a Park City vacation home and saving for their son, Cooper's, education.

	Vacation Home	Cooper's Education
Initial investment	$50,000	$50,000
Investment horizon	5 years	18 years

Alan and Alice have a marginal income tax rate of 30 percent (capital gains rate of 15 percent) and have decided to investigate the following investment opportunities.

	Annual After-Tax		Annual After-Tax
5 Years	Rate of Return	18 Years	Rate of Return

Corporate bonds (ordinary 5.75%-4.75% interest taxed annually)

Dividend-paying stock (no 3.50%-3.50% appreciation and dividends are taxed at 15%)

Growth stock is $65,000, Future value is $140,000, Future value, Municipal bond (tax-exempt) 3.20%-3.10%

Complete the two annual after-tax rates of return columns for each investment and provide investment recommendations for Alan and Alice.

Reference no: EM13905653

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