1. Curtis invests $275,000 in a city of Athens bond that pays 4.75% interest. Alternatively, Curtis could have invested the $275,000 in a bond recently issued by Initech, Inc. that pays 6.50% interest with similar risk as the city of Athens bond. Assume that Curtis's marginal tax rate is 28%. If Curtis invested in the Initech, Inc. bonds, what would be his after-tax rate ofreturn from this investment?

3.42%

4.75%

4.68%

1.71%

None of the choices are correct.

2. Curtis invests $250,000 in a city of Athens bond that pays 4.50% interest. Alternatively, Curtis could have invested the $250,000 in a bond recently issued by Initech, Inc. that pays 6.00% interest with similar risk as the city of Athens bond. Assume that Curtis's marginal tax rate is 28%.

How much explicit tax would Curtis incur on interest earned on the Initech, Inc. bond?

• $10,800
• $4,200
• $3,150
• $8,100
• None of the choices are correct.

4. Curtis invests $400,000 in a city of Athens bond that pays 6.00% interest. Alternatively, Curtis could have invested the $400,000 in a bond recently issued by Initech, Inc. that pays 6.75% interest with similar risk as the city of Athens bond. Assume that Curtis's marginal tax rate is 28%.

How much implicit tax would Curtis pay on the city of Athens bond?

• $24,000.00
• $840.00
• $740.00
• $3,000.00
• None of the choices are correct.

11. If Joel earns a 7% after-tax rate of return, $27,000 received in two years is worth how much today?

• $27,000.

• $25,200.

• $23,571.

• $28,890.

• None of the choices are correct.