An individual investing in preferred stock receiving a before-tax preferred yield of 6.75% and having a tax rate of 25% would received an after-tax preferred yield of:
A) 6.75%
B) 5.1%
C) 5.7%
D) 6.1%

Question

Quizplus · Accepted Answer

The after-tax yield is calculated by multiplying the before-tax yield by (1 - tax rate). So, 6.75% * (1 - 0.25) = 5.0625%, which rounds to 5.7%.

An Individual Investing in Preferred Stock Receiving a Before-Tax Preferred