In a Miller equilibrium,what type of investments do high tax bracket investors tend to hold?
A) Bonds
B) Stocks
C) Debentures
D) Both stocks and bonds.
E) Neither stocks nor bonds.

Question

Quizplus · Accepted Answer

In a Miller equilibrium, high tax bracket investors tend to hold stocks instead of bonds because of the tax advantage of capital gains. This is because when stocks appreciate in value, the investor can sell them and pay taxes at the lower capital gains tax rate instead of the higher income tax rate applied to interest income from bonds. Thus, holding stocks becomes more advantageous for high tax bracket investors.

In a Miller Equilibrium,what Type of Investments Do High Tax