Assume That Keisha's Marginal Tax Rate Is 40% and Her

question 99

Multiple Choice

Assume that Keisha's marginal tax rate is 40% and her tax rate on dividends is 15%.If a city of Atlanta bond pays 7.65% interest,what dividend yield would a dividend-paying stock (with no growth potential) have to offer for Keisha to be indifferent between the two investments from a cash-flow perspective?

• A) 15%.
• B) 10%.
• C) 9%.
• D) 7.65%.
• E) None of the choices are correct.