Assume the same facts as in Problem 1, except that George is a C corporation rather than an individual and is in the 34% marginal tax bracket. Which investment strategy would maximize George, Inc.’s annual return?
In Problem George comes to you asking for your advice. He wants to invest $10,000 either in a debt security or in an equity investment. His choices are shown below.
• Redbreast Corporation bond, annual coupon rate of 7.50%.
• City of Philadelphia general obligation bond, coupon rate of 6.00%.
• Blue Corporation 7.50% preferred stock (produces qualified dividend income).