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Suppose you are 28 and married. You and your spouse file for income taxes jointly. You are in the 25% tax bracket. You are considering a few personal investment issues.
Suppose you believe that the security market is efficient in the semi-strong form. Which of the following statements is correct?
a. Day trading is good because it may consistently beat the market and it saves transaction costs and taxes.
b. Day trading is not good because it cannot consistently beat the market and it involves high transaction costs and taxes.
c. Day trading may consistently beat the market, but it involves high transaction costs and taxes.
d. Day trading cannot consistently beat the market, but it saves transaction costs and taxes.
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- Suppose you are 28 and married. You and your spouse file for income taxes jointly. You are in the 25% tax bracket. You are considering a few personal investment issues. Suppose you believe that the security market is at efficient in the semi-strong form. You are considering buying some mutual fund shares in your investment accounts. Which of the following statements is correct? a. Actively managed funds are good choices because they may consistently beat the market, they are tax efficient and have lower expenses. b. Actively managed funds are not good choices because they cannot consistentlybeat the market although they are tax efficient and have lower expenses. c. Index funds are not good choices because they are not tax efficient, their management fees are higher although actively managed funds cannot consistently beat the market. d. Index funds are good choices because they are tax efficient and have lower expenses and because actively managed funds cannot consistently beat the…Assume that Keisha's marginal tax rate is 37 percent and her tax rate on dividends is 25 percent. If a city of Atlanta bond pays 7.5 percent interest, what dividend yield would a dividend-paying stock (with no growth potential) have to offer for Keisha to be indifferent between the two investments from a cash-flow perspective?Suppose you are 28 and married. You and your spouse file for income taxes jointly. You are in the 25% tax bracket. You are considering a few personal investment issues. n finance, human capital of an investor is defined as the present value of all the future earnings of this person. For young investors, human capital usually constitutes a large percentage of their total wealth. Human capital is subject to mortality risk—the likelihood that the investor dies prematurely and therefore loses all the labor income of subsequent working years. The loss of an investor's human capital is borne by his/her family. The life insurance policy provides protection against mortality risk. Which of the following is likely to be the best life insurance choice for you and your spouse? a. Buy a small life policy in the beginning and gradually increase the death benefit as you and your spouse age. b.Buy a large life policy in the beginning and gradually reduce the death benefit as you and your spouse age.…
- Suppose that Ike is loss averse. In the morning, Ike’s stockbroker calls to tell him that he has gained $1,000 on his stock portfolio. In the evening, his accountant calls to tell him that he owes an extra $1,000 in taxes. At the end of the day, does Ike feel emotionally neutral since the dollar value of the gain in his stock portfolio exactly offsets the amount of extra taxes he has to pay? Explain.Suppose you are 28 and married. You and your spouse file for income taxes jointly. You are in the 25% tax bracket. You are considering a few personal investment issues. While insurance is an effective way to protect against undesirable risk, it is by no means the only way. There exist many other tools for personal risk management. Cash reserve is one such example. By keeping cash reserve, you self-insure against unexpected future loss. Compared with self-insurance using cash reserve, buying insurance has both pros and cons. The biggest pro is mortality pooling—more efficient to manage risk on the group level than on the individual level. The biggest con is the high price of insurance policy. The high insurance premium results not just from an insurance company’s costs of producing the insurance but also from the high costs to market it (e.g.,commissions paid to insurance agents) and the additional costs caused the prevalent adverse selection and moral hazard problems in the…Your aunt has $30,000 in a saving account that pays 0.5% annual interest, and her son has told her that she could make more if she invests into the financial markets. She knows that you are a savvy financial analyst and comes to you for help. Moreover, she tells you that she does not want to invest in individual stocks but in well-diversified portfolios. Since you wanted to make sure that you propose an asset allocation that better fits her risk aversion, you asked her to complete the investor profile questionnaire and found out that a "moderate allocation" would work well for her. You proudly tell her that the easy way to hold well-diversified portfolios is through mutual funds and exchange-traded funds (ETFs). You proposed that she opens a trading account and to use mutual funds and ETFs to match her target asset allocation. However, she wants to know more about these securities before investing and asks you: what are the advantages and disadvantages of mutual funds versus…
- (a). An investor who is in the 28 % tax bracket is considering choosing between an investment earning a 6 % taxable return and an investment earning a 4 % tax-free yield. Advise the investor which investment he should choose and give reasons. (b) If you buy 100 common shares of ZANACO Plc, to what are you entitled? (c) What is the most money you could make over the next year? (d) If you pay K95 per share, what is the most money you could lose over the year? (e) Stock Initial Price Final Price Shares (millions) ABC K25 K30 20 XYZ K100 K90 1 (1) Determine the portfolio initial…( a ). An investor who is in the 28 % tax bracket is considering choosing between an investment earning a 6 % taxable return and an investment earning a 4 % tax-free yield. Advise the investor which investment he should choose and give reasons. (b). If you buy 100 common shares of ZANACO Plc, to what are you entitled? What is the most money you could make over the next year? If you pay K95 per share, what is the most money you could lose over the year?Tom and Harry are friends. Tom was injured in an accident and received a settlement. He is living off the invested amount from that settlement, since he is no longer able to work. Harry is saving money to buy a boat, something he has wanted all his life and is anxious to get as soon as he has saved enough to pay for it. Based only on transaction costs (not taxes or other factors), which of these two investors would fit into a clientele that prefers stocks with high dividend payout ratios over non-dividend-paying stocks? A. We can’t say, since the concept of a clientele can be applied only to personal taxes, not to transaction costs. B. Harry, saving for a boat, is more likely to be in the high dividend clientele. C. Both are equally likely to fall into this clientele D. Tom, living off his settlement, is more likely to be in the high dividend clientele.
- Tina, a single 37 -year-old, wants to invest in the stock market on a tax deferred basis from now until she retires. She believes that the stock market will fluctuate up and down over time, but over the long-term will be significantly higher than it is today. She does not want to pay for product features that she does not value. What type of annuity is most suitable for Tina? A) A flexible variable annuity. B) A single-premium, variable annuity. C) Adeferred, fixed annuity: D) An equity-indexed annuity.Suppose you are28 and married. You and your spouse file for income taxes jointly. You are in the 25% tax bracket. You are considering a few personal investment issues. Which of the following strategies is most tax efficient for your situation? ______ a.Invest all your income inside your regular taxable investment account. b.First, fully fund your 401 (k) account, then invest the rest in the IRA and Roth IRA account, finally invest the remaining money, if any,in your regular taxable investment account. c.Fully fund your 401 (k) account, and then invest all the rest money in your regular taxable investment account. d.First, fully fund your IRA and Roth IRA account, then fund your401 (k) account, finally invest the remaining money, if any, in your regular taxable investment account.Suppose you are28 and married. You and your spouse file for income taxes jointly. You are in the 25% tax bracket. You are considering a few personal investment issues. Which one of the followings is likely to be the best investmentinyour 401 (k) account? _____ a. Municipal bonds b. 1-year Treasury notes c. Stock mutual funds d .Annuities
