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?

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

Problem 1PS

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Emily is holding shares of stock A with market value of $100,000 that includes unrealized capital gains of $20,000. Tax rate on realized capital gains is 25%. Stock A is expected to earn annual return of 6.5% in the future. Stock B is expected to earn an 8.7% 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? Below 109,000 Between 109,000 and 110,500 Between 110,500 and 112,000 Between 112,000 and 113,500 Between 113,500 and 115,000 Above 115,000

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