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?

Question

Business

Sherlyn Mack

8 May, 01:34

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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Answers (1)

Know the Answer?

Jocelynn Willis · Answer 1

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%