1. Iris pays 15% in dividends and capital gains taxes and 35% in ordinary income taxes. Several years ago, she purchased a Mortgage-Backed Security (MBS) for $20,000 which was the par value of the underlying assets. At the end of this year, she received a statement stating she had received $700 in scheduled amortization of principal,$1,200 in interest, and $500 in unscheduled collection of principal. What is Iris's after-tax cash flow this year from this investment?
2. Before the new tax law enacted in 2003, dividends were taxed as ordinary income. Now the maximum tax rate on dividends paid to individuals is 15%. As a result of the law, an investor in the 25% tax bracket who received $70,000 in qualifying dividends had a tax savings of?
3. Corey pays 15% in dividend and capital gains taxes and 35% in ordinary income taxes. Four years ago, she invested $500,000 in a private placement offering with some friends. The initial price was $50 a share. The investment group is now discussing the possibility of publicly selling their shares. One of the members of the group believes they could get at least $75 a share. If this is correct, what are Corey's taxes when she sells her shares (ignoring commissions and fees)?
4. A $1,000 par 1.4% coupon convertible bond with a stock purchase warrant for 1 share of stock at $35 per share is purchased for $900. The common stock has a current market price of $38 per share and the warrant's market price is $4. If the market price of the stock increases to $41.80, the minimum percentage increase in the value of the warrant is?