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An investor can choose to invest in fully taxable bonds, partially taxed stock or tax-exempt bonds. The pretax yields on these three investments are 10%,
- An investor can choose to invest in fully taxable bonds, partially taxed stock or tax-exempt bonds. The pretax yields on these three investments are 10%, 7.6% (the returns to which are taxed at 42% of the ordinary tax rate applicable to fully taxable bonds) and 6.3%, respectively. The investor has a tax rate of 20% on the first $10,000 of investment income, 30% on the next $10,000 of investment income and 40% on all investment income above $20,000.
- If the investor invested $370,000 how much would be invested in fully taxable bonds?
- If the investor has $210,000 to invest how much will be allocated to the following investments:
Fully taxable bonds | Partially taxed stock | Tax exempt bonds |
$ | $ | $ |
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