Question

A bond portfolio and a stock portfolio both provided an unrealized pretax return of 8% to a taxable investor. If the stocks paid no dividends, we know that the ________.

A) after-tax return of the stock portfolio was higher than the after-tax return of the bond portfolio

B) after-tax return of the bond portfolio was higher than the after-tax return of the stock portfolio

C) after-tax income of the stock portfolio was equal to the after-tax income of the bond portfolio

D) after-tax income of the stock portfolio could have been higher or lower than the after-tax income of the bond portfolio, depending on the marginal tax rate of the investor

Answer

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