Assume that Jose is indifferent between investing in a corporate bond that pays 10 percent interest...

Question

Question

business accounting

Answer 1

Answer #1

Answer:

Bond interest * (1 – t) = Stock dividend * (1 – 15%)

10% * (1 – t) = 9.7% * (1-15%)
10%(1-t) = 9.7%(0.85)
(1-t) = 8.245%/10%
1-t = 0.8245
t = 0.1755
t = 17.55%

Answer 2

Similar Homework Help Questions

Assume that Jose is indifferent between investing in a corporate bond that pays 10 percent interest...

Assume that Jose is indifferent between investing in a corporate bond that pays 10 percent interest and a stock with no growth potential that pays an 10 percent dividend yield. Assume that the tax rate on dividends is 15 percent. What is Jose's marginal tax rate? (Do not round intermediate computations.) 7.40 percent 20.40 percent 15.00 percent None of the choices are correct. 30.20 percent
Assume that Juanita is indifferent between investing in a corporate bond that pays 11.60 percent interest...

Assume that Juanita is indifferent between investing in a corporate bond that pays 11.60 percent interest and a stock with no growth potential that pays a 7.90 percent dividend yield. Assume that the tax rate on dividends is 15 percent. What is Juanita's marginal tax rate?(Do not round intermediate computations.) 21.73 percent 42.11 percent None of the choices are correct. 10.87 percent 31.92 percent
Assume that Juanita is indifferent between investing in a corporate bond that pays 10.20 percent interest...

Assume that Juanita is indifferent between investing in a corporate bond that pays 10.20 percent interest and a stock with no growth potential that pays a 6 percent dividend yield. Assume that the tax rate on dividends is 15 percent. What is Juanita's marginal tax rate?

Assume that Marsha is indifferent between investing in a city of Destin bond that pays 3.35...

Assume that Marsha is indifferent between investing in a city of Destin bond that pays 3.35 percent interest and a corporate bond that pays 5.85 percent interest. What is Marsha's marginal tax rate? (Do not round intermediate computations.) Multiple Choice 85.48 percent 5774 percent None of the choices are correct 28.87 percent
Assume that Marsha is indifferent between investing in a city of Destin bond that pays 3...

Assume that Marsha is indifferent between investing in a city of Destin bond that pays 3 percent Interest and a corporate bond that pays 4.5 percent interest. What is Marsha's marginal tax rate? (Do not round intermediate computations.) Multiple Choice 24.17 percent 48.33 percent Oo oo 38.33 percent 66.66 percent 12 of 20 * < Prev Next >
Assume that Javier is indifferent between investing in a city of El Paso bond that pays...

Assume that Javier is indifferent between investing in a city of El Paso bond that pays 5 percent interest and a corporate bond that pays 6.25 percent interest. What is Javier's marginal tax rate?

Assume that Javier is indifferent between investing in a city of El Paso bond that pays...

Assume that Javier is indifferent between investing in a city of El Paso bond that pays 4.05 percent interest and a corporate bond that pays 5.7 percent interest. What is Javier's marginal tax rate? None of the choices are correct. 48.95 percent. 28.95 percent. 38.95 percent. 81.48 percent.
Assume that Keisha's marginal tax rate is 37 percent and her tax rate on dividends is...

Assume that Keisha's marginal tax rate is 37 percent and her tax rate on dividends is 20 percent. If a city of Atlanta bond pays 8.48 percent interest, what dividend yield would a dividend-paying stock (with no growth potential) have to offer for Keisha to be indifferent between the two investments from a cash-flow perspective? None of the choices are correct. 20.00 percent 10.60 percent 11.60 percent 8.48 percent
1. Curtis invests $825,000 in a city of Athens bond that pays 10.25 percent interest. Alternatively,...

1. Curtis invests $825,000 in a city of Athens bond that pays 10.25 percent interest. Alternatively, Curtis could have invested the $825,000 in a bond recently issued by Initech, Inc. that pays 13.00 percent interest with similar risk as the city of Athens bond. Assume that Curtis's marginal tax rate is 24 percent. How much explicit tax would Curtis incur on interest earned on the Initech, Inc. bond? Multiple Choice $81,910 $25,740 $20,295 $63,567.5 None of the choices are correct...

1. A corporate bond has a 12 percent coupon, pays interest semiannually, and matures in 10...

1. A corporate bond has a 12 percent coupon, pays interest semiannually, and matures in 10 years at $1,000. If the investor's required rate of return is 14 percent, what should the current market price of the bonds be? 2. North Pole Air has an issue of preferred stock outstanding that pays dividends of $8.50 annually. The par value of each preferred share is $100. Investors require a 12.25 percent rate of return on this stock. The next annual dividend...