Question
Assume all investors have a choice between investing in equity that will offer a 11% return in the form of capital gains or investing in
Assume all investors have a choice between investing in equity that will offer a 11% return in the form of capital gains or investing in debt that will offer a 12% return in the form of interest income. Investor A pays taxes at the rate of 35%, and Investor B pays taxes at the rate of 25% on ordinary income. Both pay taxes at the rate of 15% on capital gain income. Which type of investment should each investor make?
Group of answer choices:
Both should invest in equity Both should invest in debt A should invest in debt; B should invest in debt A should invest in equity; B should invest in equity
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