Young wants to earn at least 6.0% after tax per year, without taking on additional
incremental risk. Young’s capital gains and overall tax rate is 25%.
The broker suggests that Young rebalance her $5.5 million money market account
and the $3.0 million tax-deferred retirement account periodically in order to
maintain their targeted allocations. The broker proposes the same risk profile for
the equity positions with two potential target equity allocations and rebalancing
ranges for the two accounts as follows:
■ Alternative 1: 80% equities +/– 8.0% rebalancing range
■ Alternative 2: 75% equities +/– 10.7% rebalancing range
这样回答可以吗？
$5.5M Account: Alternative 2. $5.5M Account is taxable. higher tax, wider corridor.
$3.0M Account: Alternative 1. $3M Account is TDA, which will have a narrower corridor.
