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 ________.

Question

Quizplus · Accepted Answer

Stocks typically benefit from lower capital gains tax rates compared to the ordinary income tax rates applied to bond interest. Since the stocks paid no dividends, the entire return is likely subject to capital gains tax, resulting in a higher after-tax return for the stock portfolio.

A Bond and a Stock Portfolio Both Provided Unrealized Pretax