3. Fergie has the choice between investing in a State of New York bond at 4.4 percent and a Surething Inc. bond at 7.2 percent. Assuming that both bonds have the same nontax characteristics and that Fergie has a 30 percent marginal tax rate, what interest rate does the State of New York bond need to offer to make Fergie indifferent between investing in the two bonds?

4. Campbell, a single taxpayer, earns $189,000 in taxable income and $3,500 in interest from an investment in State of New York bonds. (Use the U.S. tax rate schedule.)

1. How much federal tax will she owe?

2. What is her average tax rate?

3. What is her effective tax rate?

4.What is her current marginal tax rate?