A Bond and a Stock Portfolio Both Provided Unrealized Pretax

question 1

Multiple Choice

A bond and a stock portfolio both provided unrealized pretax return of 8% to a taxable investor.If the stocks paid no dividends we know that the ________.

• A) after-tax return of the stock portfolio was higher than the after-tax return of the bond portfolio
• B) after-tax return of the bond portfolio was higher than the after-tax return of the stock portfolio
• C) after-tax income of the stock portfolio was equal to the after-tax income of the bond portfolio
• D) after-tax income of the stock portfolio could have been higher or lower than the after-tax income of the bond portfolio depending on the marginal tax rate of the investor

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Definitions:

Time-Series Analysis

A statistical technique that analyzes a sequence of data points, typically measured at successive times, to forecast future values.

Financial Trends

Refers to patterns or tendencies observed in financial markets or sectors over a certain period, which can indicate future movements or behaviors.

Loan Default

Occurs when a borrower fails to pay back a debt according to the initial agreement.

Financial Ratios

Metrics derived from financial statement analysis used by investors and analysts to evaluate a company's financial health and performance.