Kim Davis is in the 40% personal tax bracket. She is considering investing in HCA (taxable) bonds that carry a 12% interest rate.

a) What is her after-tax yield (interest rate) on the bonds?

b) Suppose Twin Cities Memorial Hospital has issued tax-exempt bonds that have an interest rate of 6%. With all else the same, should Kim buy the HCA or the Twin Cities bonds?

c) With all else the same, what interest rate on the tax-exempt Twin Cities bonds would make Kim indifferent between these bonds and the HCA bonds?