When Comparing a "Pre-Tax Cost" and an "After-Tax Cost", Which

question 12

Multiple Choice

When comparing a "pre-tax cost" and an "after-tax cost", which of the following is true?

• A) The after-tax cost will be greater than the pretax cost.
• B) They will be the same amount.
• C) The pre-tax cost will be greater than the after-tax cost.
• D) The higher the tax rate, the lower the difference in the amount between them.

---

Definitions:

Face Value

The nominal or stated value of a bond, share of stock, or other financial instruments, typically used as a reference for calculating interest, dividends, or premiums.

Coupon Bond

A debt security that pays the holder a fixed interest rate (coupon) over the bond's life, with the principal amount repaid at maturity.

Market Interest Rates

The prevailing rate of interest available in the marketplace for securities, loans, and deposits, determined by supply and demand dynamics.

Par Value

The face value of a bond or the stock value stated in the corporate charter, which is the nominal value of a security.