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