What Would the Equivalent Taxable Yield Be on an Investment

question 45

Multiple Choice

What would the equivalent taxable yield be on an investment that offers a 6 percent tax exempt yield? Assume a marginal tax rate of 28%.

• A) 0.125%
• B) 7.20%
• C) 6.48%
• D) 8.33%
• E) 32.14%

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Definitions:

Retained Earnings

The portion of net income that is retained by the corporation rather than distributed to its owners as dividends.

Base Year

A specific year or period selected as a reference point for comparison with subsequent years or periods in financial and economic analyses.

Net Income

The amount of earnings left after all expenses, including taxes and interest, have been deducted from total revenue; it represents the profit a company makes.

Acid-Test Ratio

A financial metric that measures a company's ability to pay off its current liabilities with its quick assets.