Roy Is Considering Purchasing Land for $10,000

question 65

Essay

Roy is considering purchasing land for $10,000.He expects the land to appreciate in value 8% each year (compounded)and he will sell it at the end of 10 years.He also is considering purchasing a bond for $10,000.The bond does not pay any annual interest,but will pay $21,589 at maturity in 10 years.The before-tax rate of return on the bond is 8%.Roy is in the 40% (35% Federal and 5% State)marginal tax bracket.Roy has other investments that earn a 8% before-tax rate of return.Given that the compound interest factor at 8% is 2.1589,and at 4.8% the factor is 1.5981,which alternative should Roy choose?

---

Definitions:

Class Analysis

The examination of the social and economic divisions within a society, particularly related to the distribution of wealth, economic status, and social influence.

Erik Olin Wright

An American sociologist known for his work on class structure, social stratification, and alternatives to capitalist economies.

Marx

Karl Marx, a 19th-century philosopher, economist, and socialist, known for his critique of capitalism and theory of historical materialism.

Class Analysis

The study of the social and economic divisions within society, particularly regarding social class and inequality.