Martin Is Trying to Decide Which One of the Following

question 128

Multiple Choice

Martin is trying to decide which one of the following bonds he should purchase.All the bonds have the same maturity date and all have approximately the same level of risk.The general level of interest rates is declining.Martin is in the 33 percent federal income tax bracket and the 6 percent state income tax bracket.The municipal bonds are from his home state. Which bond should Martin purchase if he wishes to hold it for the long term?

• A)bond A because it has the highest yield and is unlikely to be called when rates are declining
• B)bond B because it has the highest after tax yield and is unlikely to be called when rates are declining
• C)bond C because bond D is likely to be called
• D)bond D because it has the highest after tax yield and is unlikely to be called when rates are declining

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Definitions:

Procter & Gamble

A multinational corporation specializing in a wide range of consumer goods, including personal care, household cleaning, and hygiene products.

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A measurement of the profitability and effectiveness of marketing efforts, calculated by dividing the incremental financial gain from marketing by the cost of the marketing activities.