Howard Can Invest $50,000 in Land That Is Expected to Increase

Essay

Howard can invest $50,000 in land that is expected to increase in value by 8 percent per year. Alternatively he could invest in corporate bonds paying 8 percent interest, with interest reinvested at 8 percent. Howard's capital gains tax rate is 15 percent and his marginal tax rate is 24 percent. Which investment should Howard make and what is the advantage of this alternative over the other investment if he plans to sell the land in five years.