Assume you are in the 15 percent tax bracket and purchase a


1. Is a stock or a bond more affected by inflation? Why?

2. Assume you are in the 15 percent tax bracket and purchase a 6.8 percent, tax-exempt municipal bond. Calculate the tax-equivalent yield for this investment. (Round your answer to 2 decimal places.)

3. If a firm issues $10 million in common stock and invests the proceeds in marketable securities, all of the following balance sheet categories will increase, except:

a. total assets

b. total liabilities

c. stockholder’s equity

d. current assets

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Financial Management: Assume you are in the 15 percent tax bracket and purchase a
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