If the Short-Term Commercial Paper Rate Is 6% and the Corporate

question 76

Multiple Choice

If the short-term commercial paper rate is 6% and the corporate tax rate is 35%,what yield would a corporation require on an investment in floating-rate preferred stock? Assume the default risk is the same as for commercial paper.

• A)6.0%
• B)39%
• C)9.2%
• D)4.4%

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Definitions:

Bank Tellers

Employees of a bank who deal directly with customers, handling transactions and providing service.

Technological Innovation

The introduction of new technology or methods that significantly improve products, processes, or services.

Marginal Product Labor

The additional output produced as a result of employing one more unit of labor, holding other inputs constant.

Marginal Product Capital

This refers to the additional output produced as a result of using one more unit of capital, holding other inputs constant.