ome 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 6 percent yield; (b) corporate bonds at a 11 percent yield; or (c) preferred stock at an 8 percent yield. Omega Corporation is in a 40 percent tax bracket and the tax rate on dividends is 10 percent a-1. Compute the aftertax 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 Aftertax yields 3.60 a-2. Which one of the three investments should she select based on the aftertax yields? O Preferred stock
ome 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 6 percent yield; (b) corporate bonds at a 11 percent yield; or (c) preferred stock at an 8 percent yield. Omega Corporation is in a 40 percent tax bracket and the tax rate on dividends is 10 percent a-1. Compute the aftertax 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 Aftertax yields 3.60 a-2. Which one of the three investments should she select based on the aftertax yields? O Preferred stock
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Question
![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 6 percent yield; (b) corporate bonds at a 11 percent yield; or (c)
preferred stock at an 8 percent yield, Omega Corporation is in a 40 percent tax bracket and the tax rate on dividends is 10 percent.
a-1. Compute the aftertax 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
Treasury bonds
Aftertax yields
3.60%
a-2. Which one of the three investments should she select based on the aftertax yields?
Preferred stock
Corporate bond
%](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fd931d8f8-aefa-43cb-93a4-cdea2af9ca00%2F104e9f87-edd1-4608-9f44-d658d5b2a5ff%2F9aiagq2_processed.jpeg&w=3840&q=75)
Transcribed Image Text: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 6 percent yield; (b) corporate bonds at a 11 percent yield; or (c)
preferred stock at an 8 percent yield, Omega Corporation is in a 40 percent tax bracket and the tax rate on dividends is 10 percent.
a-1. Compute the aftertax 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
Treasury bonds
Aftertax yields
3.60%
a-2. Which one of the three investments should she select based on the aftertax yields?
Preferred stock
Corporate bond
%
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