The Omega Corporation has some excess cash it would like to invest in marketable securities for a long-term hold. Its Vice-President of Finance is considering three investments: (a) Treasury bonds at a 5 percent yield; (b) corporate bonds at an 8 percent yield; or (c) preferred stock at a 6 percent yield. Omega Corporation is in a 40 percent tax bracket and the tax rate on dividends is 10 percent.

a-1. Compute the after-tax yields for the three investment options.

Note: Do not round intermediate calculations. Input your answers as a percent rounded to 2 decimal places.

A. Treasury Bonds =

B. Corporate Bonds =

C. Preferred Stock =

a-2. Which one of the three investments should she select based on the aftertax yields?

A. Preferred stock

B. Treasury bonds

C. Corporate bond