Reveals very important aspect of investment strategy

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Reference no: EM131000132

In an economic environment with no inflation. $10,000 is invested in a savings bond that yields a 7% annual rate of return for 8 years. For this particular bond, the investor has the choice of paying; tax on the bond income (28%) annually, or deferring the tax until the 8th year, when tax (28%) is paid once on the entire 8-year accumulated income (but not the original $10,000) from the bond. Which tax option should the investor choose, and what is the % benefit in income? The answer to this question reveals a very important aspect of investment strategy.

Reference no: EM131000132

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