Ask Question
12 July, 02:44

Assume that Lucas' marginal tax rate is 10% and his tax rate on dividends is 5%. If a dividend-paying stock (with no growth potential) pays an 6.40% dividend yield, what interest rate would a municipal bond have to offer for Lucas to be indifferent between the two investments from a cash-flow perspective?

+5
Answers (1)
  1. 12 July, 03:09
    0
    Answer:6.08%

    Explanation:

    Assuming that Lucas' marginal tax rate is 10% and his tax rate on dividends is 5%. If a dividend-paying stock (with no growth potential) pays an 6.40 dividend yield. The interest rate that a municipal bond have to offer for Lucas

    Is

    6.4% * (1 -.05) = 0,0608

    Therefore 6.08%
Know the Answer?
Not Sure About the Answer?
Find an answer to your question 👍 “Assume that Lucas' marginal tax rate is 10% and his tax rate on dividends is 5%. If a dividend-paying stock (with no growth potential) pays ...” in 📗 Business if the answers seem to be not correct or there’s no answer. Try a smart search to find answers to similar questions.
Search for Other Answers