Margaret Owns Land That Appreciates at the Rate of 10

question 114

Multiple Choice

Margaret owns land that appreciates at the rate of 10% each year. Ralph owns a zero-coupon (i.e., all of the interest is paid at maturity but is taxed annually) corporate bond with a yield to maturity of 10%. At the end of 10 years, the bond will mature and the land will be sold. At the end of the 10 years,

• A) Margaret and Ralph will have accumulated the same after-tax amounts.
• B) Ralph will have accumulated a greater after-tax amount because the interest on the bond is tax-exempt.
• C) Margaret will have accumulated the greater after-tax amount because the gain on the land is tax-exempt.
• D) Margaret will have accumulated the greater after-tax amount but only if her marginal tax rate never exceeds 27%.
• E) Margaret will accumulate the greater after-tax amount because she earns a return on the deferred taxes.

---

Definitions:

Customer Relationship Management

A strategy for managing an organization's interactions with potential and current customers, utilizing data analysis about customers' history with a company to improve business relationships.

Marketers

Professionals who are responsible for promoting and selling products or services, including market research and advertising strategies.

Benefit

An advantage or positive outcome that individuals or organizations gain from using a product, service, or participating in an activity.

Customer Retention

The activities and actions companies and organizations take to reduce the number of customer defections.