Antonio would like to replace his golf clubs with a custom-measured set. A local sporting goods megastore is advertising custom clubs for $890, including a new bag. In-store financing is available at 3.15 percent, or he can choose not to renew his $500 certificate of deposit (CD), which just matured. The advertised CD renewal rate is 3.33 percent. Antonio knows the in-store financing costs would not affect his taxes, but he knows he'll pay taxes (25 percent federal and 5.75 percent state) on the CD interest earnings. Should he cash the CD or use the in-store financing? Why? what is the after-tax CD earnings rate? Answer with a percent.
Antonio would like to replace his golf clubs with a custom-measured set. A local sporting goods megastore is advertising custom clubs for $890, including a new bag. In-store financing is available at 3.15 percent, or he can choose not to renew his $500 certificate of deposit (CD), which just matured. The advertised CD renewal rate is 3.33 percent. Antonio knows the in-store financing costs would not affect his taxes, but he knows he'll pay taxes (25 percent federal and 5.75 percent state) on the CD interest earnings. Should he cash the CD or use the in-store financing? Why? what is the after-tax CD earnings rate? Answer with a percent.
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Question
Antonio would like to replace his golf clubs with a custom-measured set. A local sporting goods megastore is advertising custom clubs for
$890,
including a new bag. In-store financing is available at
3.15
percent, or he can choose not to renew his
$500
certificate of deposit (CD), which just matured. The advertised CD renewal rate is
3.33
percent. Antonio knows the in-store financing costs would not affect his taxes, but he knows he'll pay taxes (25 percent federal and 5.75 percent state) on the CD interest earnings. Should he cash the CD or use the in-store financing? Why?
what is the after-tax CD earnings rate? Answer with a percent.
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