Shelly is in the 24 percent tax bracket and expects to remain in that bracket in the future. She has $100,000 to invest for 5 years and has the following alternatives: (a) corporate bonds paying 7 percent; (b) tax-exempt bonds paying 4.5 percent; (c) land that is expected to increase in value to $140,000 in 5 years. Interest on either the corporate bonds or the tax-exempt bonds can be reinvested at 7 percent interest. Any gain on the sale of the land will be eligible for the 15 percent long-term capital gain tax rate. Calculate the after-tax return for each investment. Which investment do you recommend she choose?

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The Answer of Shelly is in the 24 percent tax bracket and expects to remain in that bracket in the future. She has $100,000 to invest for 5 years and has the following alternatives: (a) corporate bonds paying 7 percent; (b) tax-exempt bonds paying 4.5 percent; (c) land that is expected to increase in value to $140,000 in 5 years. Interest on either the corporate bonds or the tax-exempt bonds can be reinvested at 7 percent interest. Any gain on the sale of the land will be eligible for the 15 percent long-term capital gain tax rate. Calculate the after-tax return for each investment. Which investment do you recommend she choose?

Shelly Is in the 24 Percent Tax Bracket and Expects