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Tonya, who lives in California, inherited a $100,000 State of California bond in 2018. Her marginal Federal tax rate is 35%, and her marginal state
Tonya, who lives in California, inherited a $100,000 State of California bond in 2018. Her marginal Federal tax rate is 35%, and her marginal state tax rate is 5%. The California bond pays 3.3% interest, which is not subject to California income tax. She can purchase a corporate bond of comparable risk that will yield 5.2% or a U.S. government bond that pays 4.6% interest. Hint: Don't forget to calculate any potential federal tax savings from a deduction from CA state taxes. What is the after-tax income form each bond?
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