Hugh has the choice between investing in a City of Heflin bond at 5.85 percent or a Surething bond at 8.75 percent. Assuming that both bonds have the same nontax characteristics and that Hugh has a 40 percent marginal tax rate. What interest rate does Surething Inc., need to offer to make Hugh indifferent between investing in the two bonds?

ergie has the choice between investing in a State of New York bond at 8.5 percent and a Surething bond at 12.5 percent. Assuming that both bonds have the same nontax characteristics and that Fergie has a 30 percent marginal tax rate, in which bond should she invest?