Which of the Following Statements Is Correct About a U

question 63

Multiple Choice

Which of the following statements is correct about a U.S.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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