A Corporation in a 34% Tax Bracket Invests in the Preferred

question 17

Multiple Choice

A corporation in a 34% tax bracket invests in the preferred stock of another company and earns a 6% pre-tax rate of return.An individual investor in a 15% tax bracket invests in the same preferred stock and earns the same pre-tax return.The after tax return to the corporation is _______ and the after tax return to the individual investor is _______.

• A) 3.96%; 5.1%
• B) 5.39%; 5.1%
• C) 6.00%; 6.00%
• D) 3.96%; 6.00%

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