Ernst Gurtenbacher is coming in to see you about his investments. He is quite concerned about the amount of taxes that he pays, as his MTR is 43%, so he would like you to demonstrate to him how different types of investment incomes are taxed differently in the 2nd chart provided below, rank the investment options below from highest after tax return to lowest after tax return and show Emst the after-tax rate of return (in %) that each investment would produce for him. A preferred stock of a Canadian public company that will pay a 6.0% dividend over the next year A GIC that will pay 5.60% interest over the next year A Canadian corporate bond with a face value of $1000, exactly one year remaining to maturity, a coupon of 1.93% and a YTM of 4.62% A Canadian public company common share that does not pay a dividend, but is expected to realize a 50% increase in market value over the next year A Canadian equity mutual fund that will pay a 25% dividend and is also expected to realize a 3.0% increase in its NAVPS over the next year *ALL figures (Intermediate & final answers) should contain 3 decimal places Show your work in the boxes below: Preferred stock Mutual Fund GIC Common Share Corporate Bond Ranking summary: Investment After-tax Return 1. 2. 3. 4. 5. Ernst Gurtenbacher is coming in to see you about his investments. He is quite concerned about the amount of taxes that he pays, as his MTR is 43%, so he would like you to demonstrate to him how different types of investment incomes are taxed differently in the 2nd chart provided below, rank the investment options below from highest after tax return to lowest after tax return and show Emst the after-tax rate of return (in %) that each investment would produce for him. A preferred stock of a Canadian public company that will pay a 6.0% dividend over the next year A GIC that will pay 5.60% interest over the next year A Canadian corporate bond with a face value of $1000, exactly one year remaining to maturity, a coupon of 1.93% and a YTM of 4.62% A Canadian public company common share that does not pay a dividend, but is expected to realize a 50% increase in market value over the next year A Canadian equity mutual fund that will pay a 25% dividend and is also expected to realize a 3.0% increase in its NAVPS over the next year *ALL figures (Intermediate & final answers) should contain 3 decimal places Show your work in the boxes below: Preferred stock Mutual Fund GIC Common Share Corporate Bond Ranking summary: Investment After-tax Return 1. 2. 3. 4. 5
