Bernie and Pam Britten together earn $100,000 a year. They have $40,000 to invest they are considering buying a condo for $100,000 with a required $10,000 down payment. Their friend has recommended the following investments
the condo-expected annual increase in market value= 5%
Municipal bonds- expected to annual yield = 5%
High-yield corporate stocks-expected dividend yield = 8%
Saving account in a commerical bank-expected annual yield = 3%
High growth common stock-expected annual increase in market value = 10%; expected dividend yield = 0
Calculate the after tax yield on the foregoing investments assuming the Britten's have a 28% marginal tax rate (based on the Public Law 108-27, The Jobs and Growth Tax Relief Reconcilation Act of 2003)
How would you recommend the Britten's invest their $40,000. Explain
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