The Shrieves Corporation has $15,000 that it plans to invest in marketable secur

Question

The Shrieves Corporation has $15,000 that it plans to invest in marketable securities. It is choosing among AT&T bonds, which yield 7.75%, state of Florida muni bonds, which yield 5% (but are not taxable), and AT&T preferred stock, with a dividend yield of 6.75%. Shrieves's corporate tax rate is 40%, and 70% of the dividends received are tax exempt. Find the after-tax rates of return on all three securities. Round your answers to two decimal places.

After-tax rate of return on AT&T bond % After-tax rate of return on Florida muni bonds % After-tax rate of return on AT&T preferred stock %

Explanation / Answer

After-tax rate of return on AT&T bond = 7.75% * .60 = 4.65%

After-tax rate of return on Florida muni bonds= 5%, as it is tax exempt

After-tax rate of return on AT&T preferred stock = 6.75% - (6.75 * .30 * .40) = 5.94%

Related Questions

Navigate

• Browse (All)
• Browse T
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.