Maurice Is Currently Considering Investing in a High Dividend Yield

question 36

Essay

Maurice is currently considering investing in a high dividend yield stock with no growth potential that pays a 6 percent dividend yield or bonds issued by the Coca-Cola Company that pay 8 percent.If Maurice's ordinary tax rate is 25 percent and his dividend tax rate is 15 percent, which investment should he choose? Which investment should he choose if his ordinary tax rate is 30 percent? At what ordinary tax rate would he be indifferent between the stock or the bond? What strategy is this decision based upon?

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Definitions:

Absorption

The process by which substances are taken up and assimilated into the body of an organism.

Gas Exchange

The biological process by which gases (such as oxygen and carbon dioxide) are transferred between living organisms and the environment, typically occurring in the lungs in humans and across the surfaces of leaves in plants.

Endosymbiosis

A theory explaining the origin of eukaryotic cells from prokaryotic organisms through a symbiotic relationship.

Chloroplast

A type of organelle found in plant cells and some algae, which is the site of photosynthesis and responsible for producing energy through light.