Helen holds 500 shares of Fizbo Inc. stock that she purchased 11 months ago. The stock has done very well and has appreciated $58/share since Helen bought the stock. When sold, the stock will be taxed at capital gains rates (the long-term rate is 15 percent and the short-term rate is the taxpayers marginal tax rate). Ignore the time value of money.

a. If Helens marginal tax rate is 35 percent, how much would she save by holding the stock an additional month before selling?

Tax Savings_______

b. What might prevent Helen from waiting to sell?

Helen Bears	additional risk no risk	if she holds the stock	for an additional month	the stock price could
increase decrease	substantially if	there is market volatility	or if the company	encounters financial
difficulties. In	addition, Helen	may be selling the stock	to generate cash flow to prevent cash flow	for which she may
be unwilling to wait.