MrHayes Plans to Pay $100,000 for One of Three Investment

question 7

Multiple Choice

Mr.Hayes plans to pay $100,000 for one of three investment alternatives that have the same risk.The income from investment 1 would be taxed at Mr.Hayes' 25% regular tax rate,the income from investment 2 would be taxed at a 15% preferential rate,and the income from investment 3 is tax-exempt.The investments offer the following before-tax yields. Investment 1: 9.0%
Investment 2: 7.5%
Investment 3: 6.0%
Which investment should Mr.Hayes select?

• A)Investment 1
• B)Investment 2
• C)Investment 3
• D)Mr.Hayes is neutral between investment 2 and investment 3.

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Definitions:

Percentile Points

Points or values below which a certain percentage of observations in a dataset fall, used to measure the relative standing of a value within a dataset.

F Distribution

A probability distribution that arises in the analysis of variance and is used in hypothesis testing and confidence interval estimation for two sample variances.

F Distribution

A probability distribution used in analysis of variance (ANOVA), among other tests, describing the ratio of variances from two normally distributed populations.

Symmetrical

A characteristic of shapes, graphs, or distributions in which the two halves mirror each other when divided by a central line or point.