Susan Brown Has Decided That She Would Like to Go

question 35

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?
(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% of her investment
(3) Growth stock with an annual growth rate of 8 percent and no dividends paid
(4) Municipal bond yielding a 6 percent annual return
(5) 529 plan with 7 percent annual return (all disbursements will be spent on qualifying educational expenses).
(Round your interim calculations to the nearest whole number)

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Definitions:

Implementation Strategies

Plans and actions developed to effectively roll out and establish programs, policies, or changes within an organization.

Human Resource Management

The strategic approach to the effective management of people in an organization to help it gain a competitive advantage.

Organisational Mission

The core purpose and focus of an organization, guiding its strategies, goals, and actions.

Corporate Strategies

The overarching plans and policies that a corporation uses to achieve its goals and objectives, steering the overall direction of the company.