Shelly Is in the 24 Percent Tax Bracket and Expects

question 81

Essay

Shelly is in the 24 percent tax bracket and expects to remain in that bracket in the future. She has $100,000 to invest for 5 years and has the following alternatives: (a) corporate bonds paying 7 percent; (b) tax-exempt bonds paying 4.5 percent; (c) land that is expected to increase in value to $140,000 in 5 years. Interest on either the corporate bonds or the tax-exempt bonds can be reinvested at 7 percent interest. Any gain on the sale of the land will be eligible for the 15 percent long-term capital gain tax rate. Calculate the after-tax return for each investment. Which investment do you recommend she choose?

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Definitions:

Nazi Regime

The Nazi Regime refers to the totalitarian government led by Adolf Hitler in Germany from 1933 to 1945, which is known for initiating World War II and committing massive atrocities, including the Holocaust.

Capitalist Society

is a socio-economic system characterized by private or corporate ownership of capital goods, by investments that are determined by private decision, and by prices, production, and the distribution of goods determined mainly by competition in a free market.

Joseph Schumpeter

An economist and political scientist known for his theories on economic development and capitalism, particularly the concept of "creative destruction."

Psychological Behaviorism

A branch of psychology that focuses on observable behaviors and the ways in which they're influenced by changes in the environment, rather than internal thoughts and feelings.