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When comparing two investment options, one with an expected return of 10% per year and another with an expected return of 6% per year, which option would be more profitable considering the capital gains tax rate is 20%?

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Answer to a math question When comparing two investment options, one with an expected return of 10% per year and another with an expected return of 6% per year, which option would be more profitable considering the capital gains tax rate is 20%?

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Timmothy

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99 Answers

1. Calculate the after-tax return for the investment with a 10% expected return:

R_{10\%} = 10\% \times (1 - 0.20) = 10\% \times 0.80 = 8\%

2. Calculate the after-tax return for the investment with a 6% expected return:

R_{6\%} = 6\% \times (1 - 0.20) = 6\% \times 0.80 = 4.8\%

3. Compare the after-tax returns:

8\% > 4.8\%

Thus, the investment option with a 10% expected return is more profitable after considering the capital gains tax rate of 20%.

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When comparing two investment options, one with an expected return of 10% per year and another with an expected return of 6% per year, which option would be more profitable considering the capital gains tax rate is 20%?

Answer to a math question When comparing two investment options, one with an expected return of 10% per year and another with an expected return of 6% per year, which option would be more profitable considering the capital gains tax rate is 20%?

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