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Jason and Kerri Consalvo, both in their 50 's, have $60,000 to invest and plan to retire in 10 years. They are considering two investments.
Jason and Kerri Consalvo, both in their 50 's, have $60,000 to invest and plan to retire in 10 years. They are considering two investments. The first is a utility company common stock that costs $60 per share and pays dividends of $3.00 per share per year (a 5% dividend yield). Note that these dividends will be taxed at the same rates that apply to long-term capital gains. The Consalvos do not expect the value of this stock to increase. The other investment under consideration is a highly rated corporate bond that currently sells for $1,000 and pays annual interest at a rate of 6.0%, or $60.00 per $1,000 invested. After 10 years, these bonds will be repaid at par, or $1,000 per $1,000 invested. Assume that the Consalvos keep the income from their investments but do not reinvest it (they keep the cash in a non-interest-bearing bank account). They will, however, need to Dav income taxes on their investment income. If thev buv c. The total amount they would have from their original $60,000 if they purchased the stock and all went as planned is $85,500 (Round to the nearest cent.) d. If they purchase the bonds, the amount they will receive each year in interest after taxes is $2,340.00. (Round to the nearest cent.) e. The total amount they would have from their original $60,000 if they purchased the bonds and all went as planned is $ (Round to the nearest cent.)
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