Question
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
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.
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