A customer purchases stock for $40 per share and holds it for 1 year, selling it for $50 per share exactly 12 months after the date of purchase. Four quarterly qualifying dividends of $.50 were paid during the year. If the customer's tax bracket is 30%, what is the after-tax rate of return?

Answers

Answer 1

Answer:

24.75%

Explanation:

the customer will be taxed in two different rates:

long term capital gains = $50 - $40 = $10 per stock x (1 - 15%) = $8.50

interests are taxed as normal income = (4 x $0.50) x (1 - 30%) = $1.40

total after tax gains = $9.90

after tax rate of return = $9.90 / $40 = 0.2475 = 24.75%


Related Questions

Which explains why a supply line is upward sloping? Question 1 options: The law of Demand states that there is an indirect relationship between price and quantity The law of suppy compares marginal costs and marginal benefits in a constant rate The law of demand shoes a positive relationship between two goods, creating the slope The Law of Supply states there is a direct relationship between price and quantity

Answers

Answer:

The Law of Supply states there is a direct relationship between price and quantity

Explanation:

The law of demand states that there is an inverse relationship between the price of a good or service and the quantity demanded of that good or service, i.e. the higher the price, the lower the quantity demanded. This is why the demand curve has a negative slope.

While the law of supply states that there is a direct relationship between the price of a good or service and the quantity supplied. I.e. the higher the price, the larger the quantity supplied. This is why the supply curve has a positive slope.

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