Ian Plant faces a 12% provincial tax on income and a federal tax rate of 20.5% at the margin. On an investment of $5,000 in the shares of a Canadian-resident public corporation, he receives $362.50 of taxable dividends for a yield of 7.25%. He is considering the alternative of investing his funds in a bond paying 9%. Assume that the combined federal and provincial dividend tax credit is equal to the gross-up.

REQUIRED
Compute the after-tax return from the alternative investments to compare their desirability.