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Lena [83]
3 years ago
10

Investor Palmer has a diversified portfolio consisting of equity and debt valued at $365,000 at the start of the year. During th

e year the portfolio returns $3,579 in dividends and $2,783 in interest income. The investor withdraws the interest income while reinvesting the dividends. At year-end the portfolio is worth $389,648. The investor's marginal tax bracket is 35%. Without compounding, what is the investor's return after taxes?
Business
1 answer:
garri49 [273]3 years ago
5 0

Answer:

The return after taxes is 7.9%

Explanation:

At the start of the year the portfolio is valued at $365,000.

At the end, his portfolio has returns by dividends ($3,579), interests ($2,783) and portolio's valuation (389,648-365,000=$24,648).

The tax is applied to the dividends and interests, as:

Tax = 0.35 * (3579+2783) = 0.35*6362 = $2,226.70

We can then calculate the investor's return as

R = profit after taxes / initial portfolio valuation

R = ((3579 + 2783 - 2226.70)+24648)/365000

R= 28,783.30 / 365,000 = 0.079 = 7.9%

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Answer:

The minimum amount of time required is:

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Explanation:

Present value = $2,600

Future value = $7,800 ($2,600 * 3)

Annual interest rate = 4.1%

Monthly interest rate = 4.1%/12 = 0.342%

$2,600 will need to be invested for 321.781 (26.82 years) periods to reach the future value of $7,800.00.

FV (Future Value) $7,800.00

PV (Present Value) $2,600.00

N (Number of Periods) 321.781

I/Y (Interest Rate) 0.342%

PMT (Periodic Payment) $0.00

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Total Principal $2,600.00

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Answer:

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Hope that helps.

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