Question

You purchased 100 shares of stock for a share price of $17.61. You sold the stock two years later for a share price of $18.20. You also recelved total dividend payments of $0.61 per share. What was your total return on your investment? Answer: What is the taxable equivalent yield on a 4%, tax-exempt municipal bond for a person in the 20% tax bracket? Answer:

Answer 1

The total return on the stock investment is $61.59. The taxable equivalent yield on a 4% tax-exempt municipal bond for a person in the 20% tax bracket is 4%.

Step-by-step explanation:

The total return on your investment in the stock can be calculated as follows:

1. First, calculate the capital gain by subtracting the purchase price from the sale price: $18.20 - $17.61 = $0.59
2. Next, calculate the total dividend payments by multiplying the dividend per share by the number of shares: $0.61 x 100 = $61
3. Finally, calculate the total return by adding the capital gain and the total dividend payments: $0.59 + $61 = $61.59

Therefore, your total return on the investment is $61.59.

The taxable equivalent yield on a 4% tax-exempt municipal bond for a person in the 20% tax bracket can be calculated as follows:

1. First, calculate the tax-exempt yield by dividing the coupon rate by (1 - tax rate): 4% / (1 - 0.20) = 5%
2. Next, calculate the taxable equivalent yield by multiplying the tax-exempt yield by (1 - tax rate): 5% x (1 - 0.20) = 4%

Therefore, the taxable equivalent yield on a 4% tax-exempt municipal bond for a person in the 20% tax bracket is 4%.