John Doe is in the 40 percent personal tax bracket. He is considering investing in HCA bonds
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John Doe is in the 40 percent personal tax bracket. He is considering investing in HCA bonds that carry a 12 percent interest rate.
a. What is his after-tax yield (interest rate) on the bonds?
b. Suppose Twin Cities Memorial Hospital has issued tax-exempt bonds that have an interest rate of 6 percent. With all else the same, should John buy the HCA or the Twin Cities bonds?
c. With all else the same, what interest rate on the tax-exempt Twin Cities bonds would make John indifferent between these bonds and the HCA bonds?
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Related Book For
Healthcare Finance An Introduction To Accounting And Financial Management
ISBN: 9781567932324
3rd Edition
Authors: Louis Gapenski PhD
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