Melinda invests $220,000 in a City of Heflin bond that pays 6.8 percent interest. Alternatively, Melinda could have invested the $220,000 in a bond recently issued by Surething Incorporated 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 15 percen
Melinda invests $220,000 in a City of Heflin bond that pays 6.8 percent interest. Alternatively, Melinda could have invested the $220,000 in a bond recently issued by Surething Incorporated 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 15 percent.
Note: Leave no cells blank - be sure to enter "0" wherever required. Round your after-tax
Required:
1.What is her after-tax rate of return for the City of Heflin bond?
2.How much explicit tax does Melinda pay on the City of Heflin bond?
3.How much implicit tax does she pay on the City of Heflin bond?
4.How much explicit tax would she have paid on the Surething Incorporated bond?
5.What is her after-tax rate of return on the Surething Incorporated bond?
a. After-tax rate of return ___% ?
b. Explicit tax ___ ?
c. Implicit tax __?
d. Explicit tax __?
e. After-tax rate of return ___% ?
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