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pochemuha
3 years ago
6

Assume that Lucas' marginal tax rate is 10% and his tax rate on dividends is 5%. If a dividend-paying stock (with no growth pote

ntial) pays an 6.40% dividend yield, what interest rate would a municipal bond have to offer for Lucas to be indifferent between the two investments from a cash-flow perspective?
Business
1 answer:
polet [3.4K]3 years ago
8 0

Answer:6.08%

Explanation:

Assuming that Lucas' marginal tax rate is 10% and his tax rate on dividends is 5% .If a dividend-paying stock (with no growth potential) pays an 6.40 dividend yield . The interest rate that a municipal bond have to offer for Lucas

Is

6.4% × (1 − .05) = 0,0608

Therefore 6.08%

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The correct answer is option A.

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On the other hand, the inferior goods have a negative income elasticity. So when the income of the consumer increases the demand for inferior goods decline. This is because as income increases, the consumers will prefer normal goods.

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3 years ago
The Town of McHenry has $13,000,000 in general obligation bonds outstanding and maintains a single debt service fund for all deb
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Answer:

Dr Cash $13,000,000

Cr Other financing source- refunding of existing debt $13,000,000

Dr Other financing uses - refunding of existing debts $13,000,000

Cr Cash $13,000,000

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Preparation of the Journal entries to record the transaction on the books of the debt service fund.

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Cr Cash $13,000,000

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3 years ago
Checks written in late December do not appear on a December 31 Bank Statement because they were not cleared by the bank as of Ma
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