Ben and John are considering some bonds for investing. They want as much money after tax as possible. Their marginal rate is 24%. Their investment options include:City of Pasedena bonds with an interest rate of 6%ABC Corporate Stock with an interest rate of 8.5%State of California with an interest rate of 5.75%Apple Corporate stock with an interest rate of 8%City of Los Angeles with an interest rate of 6.25%Disney Corporate stock with an interest rate of 7.5%What is the after-tax interest rate for each of the 6 bonds they are considering?Which bond should they choose if they want the highest after tax return?

For the purpose of financing the capital interest rate must be consider as lower by the company…

Answered: Ben and John are considering some bonds…

CONCEPTS IN FED.TAX.,2020-W/ACCESS

20th Edition

ISBN:9780357110362

Author:Murphy

Publisher:Murphy

Chapter15: Choice Of Business Entity—other Considerations

Section: Chapter Questions

Problem 76P

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Ben and John are considering some bonds for investing. They want as much money after tax as possible. Their marginal rate is 24%. Their investment options include:

- City of Pasedena bonds with an interest rate of 6%
- ABC Corporate Stock with an interest rate of 8.5%
- State of California with an interest rate of 5.75%
- Apple Corporate stock with an interest rate of 8%
- City of Los Angeles with an interest rate of 6.25%
- Disney Corporate stock with an interest rate of 7.5%

What is the after-tax interest rate for each of the 6 bonds they are considering?

Which bond should they choose if they want the highest after tax return?

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