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:

Sample

A subset selected from a larger population for the purpose of statistical analysis.

Null Hypothesis

A statement postulating that there is no difference or effect, used as a starting assumption in hypothesis testing.

Type I

A statistical error that occurs when a true null hypothesis is incorrectly rejected, also known as a "false positive."

Significance Level

Another term for level of significance, indicating the critical probability level at which the results of a statistical test are deemed significant.