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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 $ in Fund A or Fund B generates a return of
percent per year. The tax rate applied to investment returns is 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 years and that a tax is paid on Fund
Bs gain at that time. Which of the following is closest to the difference in posttax
annual percentage returns for an investment in Fund A versus that in Fund B
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