Assume That Will's Marginal Tax Rate Is 20 Percent and His

Multiple Choice

Assume that Will's marginal tax rate is 20 percent and his tax rate on dividends is 15 percent. If a dividend-paying stock (with no growth potential) pays a dividend yield of 8.6 percent, what interest rate must the corporate bond offer for Will to be indifferent between the two investments from a cash-flow perspective?

A) 11.33 percent
B) 10.52 percent
C) 9) 14 percent
D) 6) 57 percent
E) None of the choices are correct.