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26 July, 00:12

Franklin Corporation has an opportunity to purchase bonds at a rate of 11%. They are in the 34% tax bracket. What is the after tax yield on these bonds?

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  1. 26 July, 00:20
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    Answer: 7.26%

    Explanation:

    Given that,

    Opportunity to purchase bonds at a rate (Pretax Yield on Bond) = 11%

    Tax bracket = 34%

    After-tax Yield on Bonds = Pre-tax Yield on Bonds * (1 - Tax Rate)

    After-tax Yield on Bonds = 11% * (1 - 0.34)

    After-tax Yield on Bonds = 11% * 0.66

    After-tax Yield on Bonds = 0.0726

    After-tax Yield on Bonds = 7.26%
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