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What is the annualized after-tax rate of return

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Question - A taxpayer can invest $1,000 in a money market fund that yields an annual pretax rate of return of 8%, or buy an acre of land for $1,000 that appreciates at a 7% annual rate. The taxpayer plans to sell the land after 20 years and faces a 25% tax rate each year.

Required -

a. What is the after-tax accumulation at the end of 20 years from each investment?

b. What is the annualized after-tax rate of return from each investment?

Reference no: EM132477384

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