The coupon rate must be set at 9.77%
The after-tax return on the bonds is:
= Annual payment rate * ( 1 - tax rate)
= 8.1% * ( 1 - 40%)
= 4.86%
The investors would like an after-tax return on preferred stock that is more than their bond return by 1% so they would like a preferred return of:
= 4.86% + 1%
= 5.86%
If the Preferred must be issued at par, its coupon rate must be equal its before-tax yield:
= After tax yield / ( 1 - tax rate)
= 5.86% / ( 1 - 40%)
= 9.77%
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New investment is usually put into an economy when profit expectations are high. The whole point of investing is creating an income in the future. You purchase goods now, and get a profit in return in the future. So, profits are expected to be higher than your buying price of a stock, property, bond, etc.
Answer:
The branch of the US government that has the power to "lay and collect taxes" is:
the Congress, according to Article I, Section 8.
Explanation:
The Congress is made up of the people's elected representatives. As such, people's consent and approval are always sought and given through the Congress for the laying and collection of taxes. The IRS is a creation of Congress. Congress empowers it to collect taxes. Even when the Executive branch proposes tax changes, they are subject to the approval of the Congress.
Answer:
The percentage changes in the price of the bonds are as follows:
Bond A 16%
Bond B 9%
Bond C 11%
Bond D 7%
Explanation:
Find detailed calculation in the attached.
Please note the line color-coded blue.
