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Ernst Gurtenbacher is coming in to see you about his investments. He is quite concerned...

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Finance

Ernst Gurtenbacher is coming in to see you about his investments. He is quite concerned about the amount of taxes that he pays, as his MTR is 41%, so he would like you to demonstrate to him how different types of investment incomes are taxed differently. Calculate the after-tax percentage return that each investment would produce.

  • A preferred stock of a Canadian public company that will pay a 5.0% dividend over the next year
  • A GIC that will pay 5.30% interest over the next year
  • A Canadian public company common share that does not pay a dividend, but is expected to realize a 4.0% increase in market value over the next year
  • A Canadian equity mutual fund that will pay a 1.5% dividend and is also expected to realize a 2.75% increase in its NAVPS over the next year

Question 9 options:

Preferred stock = 5.005%

GIC = 4.555%

Common share =3.950%

Mutual fund =3.885%

Preferred stock =4.000%

GIC = 3.964%

Common share =3.775%

Mutual fund =3.625%

Preferred stock =3.402%

GIC = 3.333%

Common share =3.245%

Mutual fund =3.100%

Preferred stock = 3.207%

GIC = 3.180%

Common share = 3.149%

Mutual fund = 3.127%

Preferred stock = 3.175%

GIC = 3.085%

Common share =3.040%

Mutual fund =3.015%

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