Credit and Taxes

Running Head : INVESTMENT EVALUATION

Investment Evaluation

[Student Name]

[Course Title]

[Instructor]

[Date]

Investment Evaluation

Currently the couple is living in a rented apartment and will have saved 40 ,000 for investment purposes . There are five investment options available for the couple which includes purchasing a condominium by paying the down payment of 10 ,000 , investing in municipal bonds high-yield corporate stocks , keeping the money in a savings account or investing in high growth common stocks . The after tax yields of Bernie and Pam Britten will be calculated by

applying the marginal tax rate of 28 on all the investment options . The tax rate would be applied to all the investment options except the Municipal bonds as they are exempted from tax (Temel , 2001 . The after tax yields will be calculated by the following formula

After Tax Yield Pre-Tax Yield (1-Tax rate

The condominium is expected to increase in market value at a rate of 2 per year . This is the expected increase in market value of the condominium and not the return or yield on investment as the couple would be living in it . Though for decision making purposes the 2 increase in value will be taken into consideration

The municipal bonds are tax exempt and the after tax yield would be same as the pretax yield which is 3

The high yield corporate stocks have an expected pretax divided yield of 5 . The after tax yield is calculate using the formula

After Tax Yield Pre-Tax Yield (1-Tax rate

After...