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:

Fair Credit Reporting Act

A U.S. federal law designed to ensure the accuracy, fairness, and privacy of consumer information contained in the files of consumer reporting agencies.

Investigative Report

A detailed report compiled as the result of a systematic, in-depth investigation or research into a specific issue, situation, or allegation.

Nationwide Consumer

Nationwide consumer refers to an individual who purchases or uses goods and services across an entire country, not limited to a specific area.

Credit Card Holder

An individual or entity that owns and utilizes a credit card for financial transactions.