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An initial investment of $ 2 , 5 0 0 in Fund A or Fund B generates a return of 9 . 5 percent per

An initial investment of $2,500 in Fund A or Fund B generates a return of 9.5
percent per year. The tax rate applied to investment returns is 32 percent. An
investment in Fund A would result in the realization of a tax on gains every year. An
investment in Fund B defers the tax on gains until the investment is sold.
Assume both investments are liquidated in 10 years and that a tax is paid on Fund
B's gain at that time. Which of the following is closest to the difference in post-tax
annual percentage returns for an investment in Fund A versus that in Fund B?
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