1. A client’s federal tax rate is 28% and his state tax rate is 4%. Which of the following would produce the most after-tax income?

A. A municipal bond yielding 4.9%.

B. A Wal-Mart bond yielding 6.5%.

C. A GE bond yielding 6.6%.

D. A WMT stock paying no dividends.

E. A treasury bond yielding 5.5%.

F. A GMC bond yielding 7.3%.

2. LKM, Inc. wants to issue new 20-year bonds for some much-needed expansion projects. The company currently has 6.5 percent coupon bonds on the market that sell for $972.78, make semiannual payments, and mature in 20 years. What coupon rate should the company set on its new bonds if it wants them to sell at par?

A. The same rates as the yield to maturity on the old bonds

B. The same rate as the current yield on the new bonds

C. The same rate as the yield to maturity on the new bonds

D. The same rate as current market interest rates

E. All of the first four answers above are correct

F. None of the first four answers above are correct