Emily is holding shares of stock A with market value of $100,000 that includes unrealized capital gains of $25,000. Tax rate on realized capital gains is 20%. Stock A is expected to earn annual return of 5.6% in the future. Stock B is expected to earn a 7.8% annual return in the future. What will be the after-tax value of switching to stock B now at the end of the holding period of three more years?

Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
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Emily is holding shares of stock A
with market value of $100,000
that includes unrealized capital
gains of $25,000. Tax rate on
realized capital gains is 20%.
Stock A is expected to earn annual
return of 5.6% in the future. Stock
B is expected to earn a 7.8%
annual return in the future. What
will be the after-tax value of
switching to stock B now at the
end of the holding period of three
more years?
Transcribed Image Text:Emily is holding shares of stock A with market value of $100,000 that includes unrealized capital gains of $25,000. Tax rate on realized capital gains is 20%. Stock A is expected to earn annual return of 5.6% in the future. Stock B is expected to earn a 7.8% annual return in the future. What will be the after-tax value of switching to stock B now at the end of the holding period of three more years?
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