Justin receives $6,000 of dividends a year, paid quarterly at the end of each quarter, from shares that cost him $100,000. As he receives the dividends, he puts them in an account earning 4.25% a year. 

a) If Justin does this for 3 years, how much will he have at the end of the 3 years, assuming he pays income taxes at the end of each year? (Calculate using HPR before and after tax)  

b) If Justin sells the shares at the end of the three years for $109,000 what was his after- tax EAR? Ans: 6.71% ( Calculate using HPR After tax)      

  -Assume a marginal tax rate of 46%, dividend tax rate of 21.8, and capital gains tax rate of 23%

Answer rating: 100% (QA)

To calculate the amount Justin will have at the end of 3 years we need to consider the dividends received and the interest earned on those dividends Lets break down the calculations step by step a Cal... View the full answer