Reference no: EM132987197

The Omega Corporation has some excess cash it would like to invest in marketable securities for a long-term hold. Its Vice-President of Finance is considering three investments:

(a) Treasury bonds at a 7 percent yield;

(b) corporate bonds at a 14 percent yield; or

(c) preferred stock at an 9 percent yield. Omega Corporation is in a 30 percent tax bracket and the tax rate on dividends is 15 percent.

Problem 1: Compute the aftertax yields for the three investment options. (Do not round intermediate calculations. Input your answers as a percent rounded to 2 decimal places.)

Treasury Bonds
Corporate Bonds
Preferred Stock

Problem 2: Which one of the three investments should she select based on the aftertax yields?