Unit 2 IP Credit and Taxes

Nature of Investment Annual Yield Tax After tax yield

The condominium 5 28 3 .60

Municipal Bonds 8 28 5 .76

Corporate Stock 8 28 5 .76

Saving Account 3 28 2 .16

Common Stock 10 28 7 .20

After Tax Yields on different investments

After tax yields are calculated by multiplying the annual yield by (1-marginal tax rate

Brittens can invest their money in two ways . Considering the above calculations , the highest rate of return would be offered by the investment made into high growth common stocks whereas equal

returns would be offered by investing into municipal bonds as well as corporate stocks . Considering the investment preferences of the Brittens they can either invest whole amount into common stocks to enjoy the highest return or invest into municipal bonds or corporate stocks . It is however important to note that common stocks are most risky investments with the possibility that the whole investment may lost too due to factors external to the control of the investors whereas on the other hand Municipal bonds are more secure investments as bond holders have the preferential rights over stockholders and secondly Municipal bonds are issued by Government entities therefore they are almost considered as risk free investment

What can also be recommended to Brittens is formation of a portfolio which comprised of both the common stocks as well as municipal bonds because it will provide an optimized rate of return at reduced level of risk . However investing into the combination of both may...