Ben and John are considering some bonds for investing. They want as much money after tax as possible. Their marginal rate is 24%. Their investment options include: City of Pasedena bonds with an interest rate of 6% ABC Corporate Stock with an interest rate of 8.5% State of California with an interest rate of 5.75% Apple Corporate stock with an interest rate of 8% City of Los Angeles with an interest rate of 6.25% Disney Corporate stock with an interest rate of 7.5% What is the after-tax interest rate for each of the 6 bonds they are considering? Which bond should they choose if they want the highest after tax return?
Ben and John are considering some bonds for investing. They want as much money after tax as possible. Their marginal rate is 24%. Their investment options include: City of Pasedena bonds with an interest rate of 6% ABC Corporate Stock with an interest rate of 8.5% State of California with an interest rate of 5.75% Apple Corporate stock with an interest rate of 8% City of Los Angeles with an interest rate of 6.25% Disney Corporate stock with an interest rate of 7.5% What is the after-tax interest rate for each of the 6 bonds they are considering? Which bond should they choose if they want the highest after tax return?
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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Ben and John are considering some bonds for investing. They want as much money after tax as possible. Their marginal rate is 24%. Their investment options include:
-
- City of Pasedena bonds with an interest rate of 6%
- ABC Corporate Stock with an interest rate of 8.5%
- State of California with an interest rate of 5.75%
- Apple Corporate stock with an interest rate of 8%
- City of Los Angeles with an interest rate of 6.25%
- Disney Corporate stock with an interest rate of 7.5%
What is the after-tax interest rate for each of the 6 bonds they are considering?
Which bond should they choose if they want the highest after tax return?
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