Which of the Following Statements Is Correct About a Corporation

question 58

Multiple Choice

Which of the following statements is correct about a 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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Definitions:

Declared Insane

A legal determination that an individual lacks the mental capacity to manage their own affairs or responsibilities due to mental illness.

Misrepresentation of Age

Falsely presenting one's age to gain access to certain rights, benefits, or permissions not otherwise available.

Financing Agreement

A financing agreement is a legal contract between a borrower and a lender outlining the terms for borrowing money, including repayment schedule, interest rates, and any collateral.

Disaffirmance Reasonable

The act of renouncing or voiding a contract or agreement, especially by a party who was not in a position to legally enter into the contract initially, under conditions considered to be fair or just.