Question
27. Assume that Larry's marginal tax rate is 24 percent. If corporate bonds pay 7 percent interest, what interest rate would a municipal bond have
27. Assume that Larry's marginal tax rate is 24 percent. If corporate bonds pay 7 percent interest, what interest rate would a municipal bond have to offer for Larry to be indifferent between the two bonds?
A)24.00%
B) 8.28%
C) 7.00%
D) 5.32%
E) None of the choices are correct
28.If Tom invests $155,000 in a taxable corporate bond that provides a 6 percent before-tax return, how much will Tom's investment be worth in either 8 or 20 years from now when the bond matures? Assume Tom's marginal tax rate is 35 percent.
A) $247,046; $497,106
B) $225,789: $397,816
C)$212,628: $341,118
D) $210,502: $333,152
E) None of the choices are correct
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