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The yield on 20-year bond of MMC Corporation is 6.35. A corporate investor would consider preferred shares issued by MMC as long as their after-tax

image text in transcribed The yield on 20-year bond of MMC Corporation is \6.35. A corporate investor would consider preferred shares issued by MMC as long as their after-tax yield exceeds that of the bond by \1.5. What before-tax yield on preferred stock would satisfy this investor? [Assume the corporate tax rate is \40 and that the tax-exclusion rate is \70.] \7.21 \5.19 \6.03 \4.33

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