A Firm in the 20 Percent Tax Bracket Is Aware

question 68

Multiple Choice

A firm in the 20 percent tax bracket is aware of a tax-exempt security that is paying a yield of 7 percent. To match this yield, taxable securities must offer a before-tax yield of

• A)8.75 percent.
• B)10.8 percent.
• C)20.0 percent.
• D)None of these are correct.

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Definitions:

Net Increase

The amount by which something grows or goes up, calculated by taking total gains and subtracting any losses.

Inventories

The stock of goods or materials that a company holds for the ultimate goal of resale or production.

Investment

The purchase of new plants, new equipment, new buildings, and new residences, plus net additions to inventories.

Nominal GDP

The total market value of all goods and services produced in a country in a given period, measured using current prices without adjusting for inflation.