Question
____ 32. Emily is in the 35% marginal tax bracket. She can purchase a York County school bond yielding 3.5% interest and the interest is
____ 32. Emily is in the 35% marginal tax bracket. She can purchase a York County school bond yielding 3.5% interest and the interest is not subject to a 5% state tax. But she is interested in earning a higher return for comparable risk.
a. | If she buys a corporate bond that pays 6% interest, her after-tax rate of return will be less than if she purchased the York County school bond. |
b. | If she buys a U.S. government bond paying 5%, her after-tax rate of return will be less than if she purchased the York County school bond. |
c. | If she buys a common stock paying a 4% dividend, her after-tax rate of return will be higher than if she purchased the York County school bond. |
d. | All of the above are correct. |
e. | None of the above are correct. |
Instructions: Please show all work, provide 2-3 sentence brief explanation and choose the best multiple choice answer. All sources must be noted.
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