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?

Multiple Choice

3.74%

5.93%

7.26%

9.62%

11%

To find the **after-tax yield** on the bonds for Franklin Corporation, we use the formula:

\[
\text{After-tax yield} = \text{Bond yield} \times (1 - \text{Tax rate})
\]

### Given:
- **Bond yield** = 11% or 0.11
- **Tax rate** = 34% or 0.34

Now, calculate the after-tax yield:

\[
\text{After-tax yield} = 0.11 \times (1 - 0.34)
\]

\[
\text{After-tax yield} = 0.11 \times 0.66 = 0.0726 \text{ or } 7.26\%
\]

### Answer: 7.26%

Would you like further details or explanations on this? Here are 5 related questions to consider:

1. How would the after-tax yield change if the tax rate were 40%?
2. What is the relationship between tax rates and after-tax bond yields?
3. How is the bond yield affected by inflation rates?
4. What are the implications of a higher tax bracket for investment decisions?
5. How do corporate tax benefits affect overall profitability?

**Tip:** When investing, always consider the tax implications, as they can significantly affect the real return on your investments.

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?

Learn how to calculate the after-tax yield on bonds for Franklin Corporation with a bond yield of 11% and a tax rate of 34%. Using the formula After-tax yield = Bond yield × (1 - Tax rate), this problem demonstrates key financial and taxation concepts. Suitable for students in Grades 9-12.

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