Assume that Keisha's marginal tax rate is 40% and her tax rate on dividends is 15%. If a city of Atlanta bond pays 7.65% interest, what dividend yield would a dividend-paying stock (with no growth potential) have to offer for Keisha to be indifferent between the two investments from a cash-flow perspective?
A) 15.00%.
B) 10.00%.
C) 9.00%.
D) 7.65%.
E) None of the choices are correct.
Correct Answer:
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