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Business, 20.09.2020 16:01 cbbentonam72

Melinda invests $350,000 in a City of Heflin bond that pays 6.4 percent interest. Alternatively, Melinda could have invested the $350,000 in a bond recently issued by Surething Inc., that pays 8 percent interest and has risk and other nontax characteristics similar to the City of Heflin bond. Assume Melinda's marginal tax rate is 20 percent. (Leave no cells blank - be sure to enter "O" wherever required. Round your after-tax rate of return to one decimal place.) Required:
a. What is her after-tax rate of return for the City of Heflin bond?
b. How much explicit tax does Melinda pay on the City of Heflin bond?
c. How much implicit tax does she pay on the City of Heflin bond?
d. How much explicit tax would she have paid on the Surething Inc. bond?
e. What is her after-tax rate of return on the Surething Inc. bond?
Hugh has the choice between investing in a City of Heflin bond at 7.6 percent or investing in a Surething Inc. bond at 10.6 percent. Assuming that both bonds have the same nontax characteristics and that Hugh has a 40 percent marginal tax rate, in which bond should he invest? Hugh should invest in the Fergie has the choice between investing in a State of New York bond at 6.9 percent and a Surething Inc. bond at 10.8 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? (Do not round intermediate calculations. Round your answer to 2 decimal places.)

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Melinda invests $350,000 in a City of Heflin bond that pays 6.4 percent interest. Alternatively, Mel...
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