Suppose your firm earns $2 million in taxable income. What is the firm's tax liability? What is the average tax rate? What is the marginal tax rate? 1. ii. Taxable Income 0 and under 50,000 50,000 and under 75,000 75,000 and under 100,000 100,000 and under 335,000 335,000 and under 4,000,000 Tax Rate 10% 20% 30% 40% 50% 2. 3. 4. Suppose you have $20,000 to invest and you believe that you can earn 12 per year over the next 5 years. i. How much would you have at the end of 5 years using compound interest? How much would you have using simple interest? Why these two figures are not the same? ii. iii. Suppose you buy a 12 percent coupon, 10-year bond today when it is first issued. If interest rates suddenly rise to 15 percent, what is the value of your bond? XYZ Corporation issued 10-year bonds a year ago at a coupon rate of 10 percent. The bonds make semiannual payments. If the YTM on these bonds is 7 percent, what is the current bond price?