Question

An investment's time horizon affects the after-tax rate of return on investments taxed annually. true or false

Answer 1

Answer:

False, the investment's time horizon doesn't affect the after-tax rate of return on investments taxed annually.

Explanation:

The investment's time horizon is the time someone is going to maintain it's position on a certain investment before they need the money in a liquid state. They are defined by the individual investment strategy and they are relative to those times. For example, a longterm investment is an investment with a long term horizon and that it is focused on a big reward. It doesn't take into account the type of investment project, it could be a stock, lend, credit, real state, etc. And the period of time on the investment capital would be named investment time horizon.

Answer 2

True. Because of the time value of money taxes paid in the future have a reduced economic burden on the tax payer. Since most investments are taxed only when you cash out, the longer the investment's time horizon, the greater the after-tax rate of return.