Assume That Lucas's Marginal Tax Rate Is 32 Percent and His

Multiple Choice

Assume that Lucas's marginal tax rate is 32 percent and his tax rate on dividends is 15 percent. If a dividend-paying stock (with no growth potential) pays an 8 percent 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?

A) 32.00 percent
B) 15.00 percent
C) 8) 00 percent
D) 6) 80 percent
E) None of the choices are correct.