Dennis is currently considering investing in municipal bonds that earn 5.55 percent interest, or in taxable bonds issued by the Coca-Cola Company that pay 7.40 percent. a. If Dennis's tax rate is 22 percent, which bond should he choose? b. Which bond should he choose if his tax rate is 32 percent? c. At what tax rate would he be indifferent between the bonds?
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- Hui is currently considering investing in municipal bonds that earn 8.55 percent interest, or in taxable bonds issued by the Coca-Cola Company that pay 11.40 percent. Required: If Hui's tax rate is 22 percent, which bond should he choose? Which bond should he choose if his tax rate is 32 percent? At what tax rate would he be indifferent between the bonds? What strategy is this decision based upon?Hui is currently considering investing in municipal bonds that earn 8.40 percent interest, or in taxable bonds issued by the Coca- Cola Company that pay 11.00 percent. Required: If Hui's tax rate is 22 percent, which bond should he choose? Which bond should he choose if his tax rate is 32 percent? At what tax rate would he be indifferent between the bonds? What strategy is this decision based upon?Answer b,c,and d
- Hui is currently considering investing in municipal bonds that earn 3.64 percent interest, or in taxable bonds issued by the Coca-Cola Company that pay 5.20 percent. Required: a. If Hui's tax rate is 22 percent, which bond should he choose?An investor is attempting to decide between the purchase of a tax-free municipal bond or a corporate bond. She is in the 32% tax bracket (rate). A municipal bond yields 2.2% interest and a corporate bond yields 3.1% interest. Which should she purchase? Please state the reason.Hugh has the choice between investing in a City of Heflin bond at 5.25 percent or investing in a Surething Incorporated bond at 7.75 percent. Assuming that both bonds have the same nontax characteristics and that Hugh has a 40 percent marginal tax rate, what interest rate does Surething Incorporated need to offer to make Hugh indifferent between investing in the two bonds? (Round your answer to 2 decimal places.) Answer: Interest Rate %
- 4) An investor purchases one municipal and one corporate bond that pay rates of return of 7.5% and 10.3%, respectively. If the investor is in the 24% marginal tax bracket, what will be his or her after-tax rates of return on the municipal and corporate bonds?Fergie has the choice between investing in a State of New York bond at 5 percent and a Surething Inc. bond at 8 percent. Assuming that both bonds have the same nontax characteristics, and that Fergie has a 30 percent marginal tax rate, in which bond should she invest?Hugh has the choice between investing in s City of Heflin bond at 6 percent or investment in Surething, Inc. bond at 9 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?
- The interest rate on a taxable bond is 4%. If your personal tax rate is 25%, what interest rate on a nontaxable bond will make you indifferent between the 2 investments?Suppose your marginal federal income tax rate is 25 percent. 1. What is your after-tax return from holding a one-year corporate bond with a yield of 5.25 percent? (1 pt) 2. What is your after-tax return from a holding a one-year municipal bond with a yield of 4 percent? (1 pt) 3. How would you decide which bond to hold? (Assume that Both bonds carry the same risk.) (1 pt)If Oliver can earn 6.9% interest on a City of Bloomington bond and 10.4% interest on a Dragon, Inc. corporate bond, what would his marginal tax rate have to be to make him indifferent between the two bonds? Express your answer as a decimal, and round to the nearest second decimal place. For example if you arrived at an answer of 16.7%, type 0.17 into the box below.