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:

Defense Mechanisms

Psychological strategies used by individuals to cope with reality and maintain self-image.

Denial

A psychological defense mechanism where reality or facts are rejected because they are uncomfortable or distressing.

Projection

A defense mechanism in which an individual ascribes their own unacceptable thoughts, feelings, or impulses to others.

Sexual Jokes

Humorous expressions or stories that involve sexual content, often used to break the ice or entertain, but can sometimes be inappropriate or offensive.