Problem 1-44 (LO 1-3, LO 1-4) (Algo) Hugh has the choice between investing in a City of Heflin bond at 3.45 percent or investing in a Surething Incorporated bond at 4.75 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? Note: Round your answer to 2 decimal places. Interest rate %
Problem 1-44 (LO 1-3, LO 1-4) (Algo) Hugh has the choice between investing in a City of Heflin bond at 3.45 percent or investing in a Surething Incorporated bond at 4.75 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? Note: Round your answer to 2 decimal places. Interest rate %
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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Transcribed Image Text:Problem 1-44 (LO 1-3, LO 1-4) (Algo)
Hugh has the choice between investing in a City of Heflin bond at 3.45 percent or investing in a Surething Incorporated bond at 4.75
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?
Note: Round your answer to 2 decimal places.
Interest rate
%
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