Connect Access Card for McGraw-Hill's Taxation of Individuals and Business Entities 2019 Edition

10th Edition

ISBN: 9781260189698

Author: Brian C. Spilker Professor, Benjamin C. Ayers, John Robinson Professor, Edmund Outslay Professor, Ronald G. Worsham Associate Professor, John A. Barrick Assistant Professor, Connie Weaver

Publisher: McGraw-Hill Education

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Chapter 1, Problem 42P

Melinda invests $200,000 in a City of Heflin bond that pays 6 percent interest. Alternatively, Melinda could have invested the $200,000 in a bond recently issued by Surething Inc. 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 25 percent.

a) What is her after-tax rate of return for the City of Heflin bond?
b) How much explicit tax does Melinda pay on the City of Heflin bond?
c) How much implicit tax does she pay on the City of Heflin bond?
d) How much explicit tax would she have paid on the Surething Inc. bond?
e) What is her after-tax rate of return on the Surething Inc. bond?

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Chapter 1, Problem 41P

Chapter 1, Problem 43P

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Connect Access Card for McGraw-Hill's Taxation of Individuals and Business Entities 2019 Edition

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Solution Summary: The author explains the difference between an explicit and an implicit tax.

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