Steve Purchases Some Land for $30,000

question 4

Multiple Choice

Steve purchases some land for $30,000.He maintains it,but makes no improvements to it.One year later he sells it for $32,000.Stephanie puts $30,000 in a savings account that pays 6% interest.Steve has to pay the 50% capital gains tax,Stephanie is in the 35% tax bracket.The inflation rate was 2%.Who had the higher before-tax real gain and who had the higher after-tax real gain?

• A)Steve had both the higher before-tax real gain and the higher after-tax real gain.
• B)Steve had the higher before-tax real gain but Stephanie had the higher after-tax real gain.
• C)Stephanie had the higher before-tax real gain but Steve had the higher after-tax real gain.
• D)Stephanie had both the higher before-tax real gain and the higher after-tax real gain.

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Definitions:

Equity Investments

Financial investments in stocks that represent ownership in a company or corporation.

Stock Market

A marketplace where stocks, bonds, and other securities are bought and sold, facilitating capital raising for companies and investment opportunities for individuals.

Expected Return

Return that an asset should earn on average.

Consumer Decision Making

The process by which consumers identify their needs, gather information, evaluate alternatives, and make choices regarding products and services.