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Item 17

Assume that Keisha's marginal tax rate is 37 percent and her tax rate on dividends is 25 percent. If a city of Atlanta bond pays 7.5 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?

Multiple Choice

• 25.00 percent

• 11.00 percent

• 10.00 percent

• 7.50 percent

• None of the choices are correct.