Big Q

As an institutional investor paying a marginal tax rate of 46%, your after-tax dividend yield on preferred stock with a 16% before-tax dividend yield would be:

 

                       

 

3.         A 7% coupon bond issued by the state of New York sells for $1,000 and thus provides a 7% yield to maturity. For an investor in the 40% tax bracket, what coupon rate on a Carter Chemical Company bond that also sells at its $1,000 par value would cause the two bonds to provide the investor with the same after-tax rate of return?