yufinplan#5

yufinplan#5 - LECTURE #5-TAX PLANNING Agenda 1. Hand in...

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LECTURE #5-TAX PLANNING Agenda 1. Hand in Assignment #1 2. Take up assigned problems: Chapter #7, 3. Chapter #8-Income Tax Planning. Read the chapter. 4. Mid-term Exam Review.

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Chapter #7-M.C. Questions & Problem #3 Multiple Choice #3-The answer is (b). Use the formula to work out the answer. #5-The answer is (d). Try to figure it out.
Chapter #7-Problem #3 3.(a) PV=950, FV=1000, n=10, PMT=25, Interest =3.089% per 6 months. Therefore, Yield to Maturity (YTM)=2x3.089=6.178% EAR=(1.0389)^2-2=6.273% (b) The coupon (interest) is taxed at 44%. The after-tax coupon is \$14 semi-annually. The capital gain of \$1,000-950=\$50 is taxable. Capital gains tax=(.50)(\$50)(.44)=\$11.00 Proceeds after tax=\$1,000-11.00=\$989.00. PV=\$950,FV=989, n=10, PMY=14, i=1.8512% semi- annually, YTM=2x1.8512=3.702%, EAR=(1.018512)^2-1=3.74%.

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Chapter #8-Income Tax Planning Tax Minimizing Strategies A. Income Deferral Strategies (Delay Payment of Tax) 1. Registered Pension Plans (RPP) No tax on employees when employer makes a
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yufinplan#5 - LECTURE #5-TAX PLANNING Agenda 1. Hand in...

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