Which of the Following Statements Is Correct About a Canadian

question 21

Multiple Choice

Which of the following statements is correct about a Canadian corporation in the 35 % tax bracket that can invest either in a bond paying 8 % interest or in the preferred stock of another corporation that pays a 6 % dividend?

• A)the stock is preferred by approximately.17 %.
• B)the stock is preferred by approximately.80 %.
• C)the bond is preferred by approximately 1.30 %.
• D)the after-tax yields are identical on each.

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Definitions:

Income Elasticity

A measure of how much the demand for a good or service changes in response to a change in income.

Inferior Good

A good for which a rise in income decreases the demand for the good.

Income Elasticity

A measure of how much the quantity demanded of a good changes in response to a change in consumers' income.

Peanut Butter

A food paste or spread made from ground, dry-roasted peanuts, often used as a sandwich filling or ingredient in various recipes.