Susan Brown Has Decided That She Would Like to Go

question 104

Essay

Susan Brown has decided that she would like to go back to school after her kids leave home in five years. To save for her education, Susan would like to invest $25,000 in an investment that provides a high return. If her marginal tax rate is 35 percent, what is Susan's after-tax rate of return for the following investment options? Qualified dividends are taxed at 15 percent.
(1)Corporate bond issued at face value with 10 percent stated interest rate payable annually.
(2)Dividend-paying stock with an annual qualifying dividend equal to 10 percent of her investment.
(3)Growth stock with an annual growth rate of 8 percent and no dividends paid. (Round your interim calculations to the nearest whole number.)

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Definitions:

Fixed-interval Schedule

A type of reinforcement schedule in behavioral psychology where rewards are provided after a consistent time period passes.

Variable-interval Schedule

A reinforcement schedule in which rewards are given after an unpredictable time interval, leading to a steady, moderate response rate.

Fixed-ratio Schedule

A type of reinforcement schedule in operant conditioning where a response is reinforced only after a specified number of responses, leading to a high and steady rate of responding.

Classical Conditioning

Classical Conditioning is a learning process that occurs through associations between an environmental stimulus and a naturally occurring stimulus, famously illustrated by Pavlov's dogs experiment.