Question
You purchased 74 shares of Z stock in January 2022 for $40 per share. Each year you received a cash dividend of $0.75 per share.
You purchased 74 shares of Z stock in January 2022 for $40 per share. Each year you received a cash dividend of $0.75 per share. In December of 2026, you sold 74 shares of Z for $60 per share. Brokerage fees amounted to 3.0% of the purchase price and 3.0% of the sales proceeds. Use this information to answer the next 5 questions.
(part 1) What would be your future account value (after-tax and after inflation) if you invested $600 each month into a growth mutual fund for 35 years? Assume an average annual rate of return of 7.5 percent. Assume a combined federal and state income tax rate of 28% and an average annual inflation rate of 2.7 percent.
A. $418,469.15
B. $412,758.60
C. $449,687.25
D. $362,419.38
(part 2) What would your future account value (after-tax and inflation) if you invest $10,000 each year into a mutual fund for 20 years? Assume an annual rate of return of 11.0 percent. Assume an income tax rate of 22% and an inflation rate of 3.5 percent.
A. $343,534.54
B. $388.459.62
C. $488,107.40
D. $327,470.02
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