…a contract for a series of exchanges of the total return on specified asset in return for specific fixed or floating payments. Similar to the short sale against the box, investor is fully hedged and earns money market rate return. Because a derivative dealer is involved the return is less than short sale against the […]

Portfolio Size (1 + Rae)^n = After-Tax Accumulation Solve for Rae, the Accrual Equivalent Return Then solve for Tae, the Accrual Equivalent Tax Rate r(1 – Tae) = Rae

FVIFtaxable = (1 + r*)(1 – T*) + T* – (1 – B)tcg r* = Annual After-Tax Return n = number of years T* = Effective Capital Gains Tax Rate B = Cost Basis as Percentage tcg = tax rate on capital gains

T* = tcg(1 – pi – pd – pig) / (1 – piti – pdtd – pcgtcg) tcg = tax rate on capital gains pi = percentage of return from interest pd = percentage of return from dividends pcg = percentage of return from capital gains ti = tax rate on interest income td = […]

r* = r(1 – piti – pdtd – pcgtcg) r = rate of return pre-tax piti = % of portfolio return from interest times tax rate on interest pdtd = % of portfolio return from dividends times tax rate on dividends pcgtcg = % of portfolio return from capital gains times tax rate on capital […]

FVIFw = [(1+r)(1-tw)]n r = rate of return tw = tax on wealth (annual) n = number of periods (usually years)

FVIFcgb = (1+r)^n(1-tcg) + tcgB r = rate of return n = number of periods (usually years) tcg = tax rate on capital gains B = cost basis as a percentage

FVIFcg = (1+r)^n(1+tcg) + tcg

Under U.S. GAAP assumed long-run rate of return on plan assets is used to smooth the volatility that would be caused by using actual returns. Under IFRS expected rate of return on plan assets is implicitly equal to the discount rate used for computing PBO.