Bernie and Pam Britten are a young married couple beginning careers and establishing a household.?
Question:
They will each make about $50,000 next year and will have accumulated about $40,000 to invest. They now rent an apartment but are considering purchasing a condominium for $100,000. If they do, a down payment of $10,000 will be required.
They have discussed their situation with Lew McCarthy, an investment advisor and personal friend, and he has recommended the following investments:
( expected dividend yield )
The condominium - = 5%.
Municipal bonds - = 5%.
High-yield corporate stocks - = 8%.
Savings account in a commercial bank- = 3%.
High-growth common stocks - = 10%; expected dividend yield = 0.
Calculate the after-tax yields on the foregoing investments, assuming the Brittens have a 28% marginal tax rate (based on Public Law 108-27, The Jobs and Growth Tax Relief Reconciliation Act of 2003).
How would you recommend the Brittens invest their $40,000? Explain your answer.
Answer:
There is no correct answer for your homework question. You have to make a decision and then give your reasoning behind it. One approach would be to divide up their investments into several categories and then explain the advantages of each type of investment...that's what the instructor will be grading.
Good luck.
Sorry, we are not here to do your homework.
Perhaps they could invest in doing their own homework!
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