If the Short-Term Commercial Paper Rate Is 10% and the Corporate

question 31

Multiple Choice

If the short-term commercial paper rate is 10% and the corporate tax rate is 35%,what yield would a corporation require on an investment in floating-rate preferred stock? Assume the default risk is the same as for commercial paper.

• A)15.2%
• B)10.0%
• C)7.3%
• D)6.6%

---

Definitions:

Discouraging Adults

Measures or strategies aimed at dissuading adult behavior deemed negative or harmful.

Age Of Majority

The threshold of adulthood as recognized by law, typically 18 years old in many countries, marking the point at which a person is legally considered an adult.

Right To Contract

The legal ability of an individual or entity to enter into binding agreements.

Great Britain

The island comprising England, Scotland, and Wales, often used to refer to the United Kingdom which includes Northern Ireland.