# A bond with a coupon rate

June 11, 2016

Question
11. A bond with a coupon rate of 6.5% (assume it is paid once annually), maturing in 10 years at a value of \$1,000 and a current market price of \$695, will have a current yield of
11.3%.
10.2%.
9.4%.
8.5%.

18. Preferred stock is often sold by companies?
a. wanting to balance their capital structures.
b. that have a large amount of debt relative to equity.
c. looking for the taxable advantages of preferred dividends over common stock dividends.
d. that have a large amount of debt relative to equity and that want to balance their capital structures.

24. Buggy Whip Manufacturing Company is issuing preferred stock yielding 19%. Selten Corporation is considering buying the stock. Buggy’s tax rate is 0% due to continuing heavy tax losses, and Selten’s tax rate is 44%. What is the after-tax preferred yield for Selten? (Round your answer to 2 decimal places.)
18.59
16.49
17.64
14.99

25. An individual investing in preferred stock receiving a before-tax preferred yield of 6.75% and having a tax rate of 25% would receive an after-tax preferred yield of _____. Assume the tax rate on dividends is 15%.
6.75%
5.1%
5.7%
6.1%