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

question 45

Multiple Choice

A corporation in a 34% tax bracket invests in the preferred stock of another company and earns a 6% pretax rate of return. An individual investor in a 15% tax bracket invests in the same preferred stock and earns the same pretax 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%; 6%
• D) 3.96%; 6%

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Definitions:

Iron

A chemical element with the symbol Fe, essential for various biological processes including oxygen transport in hemoglobin.

Capillaries

The smallest blood vessels in the body's circulatory system, where the exchange of water, oxygen, carbon dioxide, and other nutrients and waste substances occurs between blood and tissues.

Arterioles

Small blood vessels that extend and branch out from arteries and lead to capillaries, playing a key role in regulating blood pressure.

Vena Cava

The two large veins (the superior vena cava and the inferior vena cava) that carry deoxygenated blood from the body back to the heart.