Curtis invests $250,000 in a city of athens bond that pays 7% interest. alternatively, curtis could have invested the $250,000 in a bond recently issued by initech, inc. that pays 9% interest with similar risk as the city of athens bond. assume that curtis's marginal tax rate is 28%.

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Business

Kelly Trujillo

8 February, 13:41

Curtis invests $250,000 in a city of athens bond that pays 7% interest. alternatively, curtis could have invested the $250,000 in a bond recently issued by initech, inc. that pays 9% interest with similar risk as the city of athens bond. assume that curtis's marginal tax rate is 28%.

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Red Velvet · Answer 1

I guess the correct answer is 6.48%

If Curtis invested in the Initech, Inc. bonds, The after-tax rate of return from this investment is 6.48%.

Since, [ (1 - 0.28) * (250,000 *.09) ]/250,000 =.0648.