1. Suppose Lucas's marginal tax rate is 40% and his tax rate on dividends is 20%. If a dividend-paying stock (with no growth potential) pays a dividend yield of 7.00%, what interest rate would a municipal bond have to offer for Lucas to be indifferent between the two investments from a cash flow perspective?

2. Suppose Shavonne's marginal tax rate is 50% and her dividend tax rate is 25%. If a corporate bond pays 9.6% interest, what dividend yield would a dividend-paying stock (with no growth potential) have to offer for Shavonne to be indifferent between the two investments from a cash flow perspective?

3. Suppose that Joe is indifferent to investing in a corporate bond that pays 10% interest and a stock with no growth potential that pays a dividend yield of 9.2%. Suppose the tax rate on dividends is 15%. What is Jose's marginal tax rate?

4. Suppose that Juanita is indifferent to investing in a corporate bond that pays 8% interest and a stock with no growth potential that pays a dividend yield of 6.1%. Suppose the tax rate on dividends is 15%. What is Juanita's marginal tax rate?

Answer rating: 100% (QA)

1 Lucass marginal tax rate is 40 and his tax rate on dividends is 20 A dividendpaying stock with no growth potential has a dividend yield of 700 We need to find the interest rate a municipal bond woul... View the full answer