Models and More Has a Bond Issue Outstanding with a Face

question 4

Multiple Choice

Models and More has a bond issue outstanding with a face value of $215,000.These bonds have a coupon rate of 5.65 percent,pay interest semiannually,and have a current market price quote of 1.01.The tax rate is 34 percent.What is the amount of the annual interest tax shield?

• A)$5,125.50
• B)$4,130.15
• C)$4,176.13
• D)$4,171.45
• E)$5,297.89

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Definitions:

Erythropoietin

A hormone produced mainly by the kidneys, stimulating the production and maintenance of red blood cells in response to low oxygen levels in tissues.

Platelet Plug

A mass formed by platelets that accumulates at a site of blood vessel injury to help stop bleeding.

Vasoconstriction

The constriction of blood vessels that elevates blood pressure and diminishes blood circulation to specific regions.

Thromboxane

Specific class of physiologically active fatty acid derivatives present in many tissues.