The Omega Corporation has some excess cash it would like to invest in marketable securities for a long-term hold. Its Vice of Finance is considering three investments: (a) Treasury bonds at a 10 percent yield; (b) corporate bonds at a 13 percent yi preferred stock at an 11 percent yield. Omega Corporation is in a 35 percent tax bracket and the tax rate on dividends is 20 -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. X Answer is complete but not entirely correct. Aftertax yields 6.50 % 8.45 % 10.23 % a. Treasury bonds b. Corporate bonds c. Preferred stock -2. Which one of the three investments should she select based on the aftertax vields?
The Omega Corporation has some excess cash it would like to invest in marketable securities for a long-term hold. Its Vice of Finance is considering three investments: (a) Treasury bonds at a 10 percent yield; (b) corporate bonds at a 13 percent yi preferred stock at an 11 percent yield. Omega Corporation is in a 35 percent tax bracket and the tax rate on dividends is 20 -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. X Answer is complete but not entirely correct. Aftertax yields 6.50 % 8.45 % 10.23 % a. Treasury bonds b. Corporate bonds c. Preferred stock -2. Which one of the three investments should she select based on the aftertax vields?
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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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 10 percent yield; (b) corporate bonds at a 13 percent yield; or (c)
preferred stock at an 11 percent yield. Omega Corporation is in a 35 percent tax bracket and the tax rate on dividends is 20 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.
Answer is complete but not entirely correct.
Aftertax yields
a. Treasury bonds
b. Corporate bonds
c. Preferred stock
6.50 %
8.45✔ %
10.23 X %
a-2. Which one of the three investments should she select based on the aftertax yields?
Preferred stock
O Treasury bonds
O Corporate bond
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