Essay
Amanda received a $300,000 inheritance on May 1st,20X2.With the proceeds,she purchased the following investments:
1)Two rental properties: Property A has a value of $85,000,of which $40,000 is allocated to the building.Property B has a value of $110,000,of which $60,000 is allocated to the building.The properties earned $9,750 in rental income before CCA.The capital growth of the two buildings combined is expected to be 5%.
2)A bond: Valued at $50,000 with 10% annual interest paid at maturity
3)Portfolio shares: Worth $10,000 - Eligible dividends in the amount of $700 were paid to Amanda before the end of the year.The capital growth of the shares is expected to be 3%.
4)The remainder of the money was applied to her $150,000 mortgage.
Amanda is in a personal marginal tax bracket of 45%.Her marginal tax rate for dividends is 21%,and her marginal tax rate for capital gains is 23%.
Required:
A)Calculate Amanda's minimum property income for 20X2.
B)Calculate the annual pre-tax yield (as a percentage)for each of the three investments.
C)Calculate the after-tax yield (as a percentage)for each of the three investments.
D)Briefly explain the tax benefit that Amanda could have realized had she used her inheritance to pay off her mortgage and then borrowed funds to make the above investments.
Correct Answer:

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Correct Answer:
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