Curtis invests $700,000 in a city of Athens bond that pays 9.25 percent interest. Alternatively, Curtis could have invested the $700,000 in abond recently issued by Initech, Incorporated that pays 11 percent interest with similar risk as the city of Athens bond. Assume that Curtis'smarginal tàx rate is 24 percent.What is Curtis's after-tax rate of return on the city of Athens bond?Multiple Choice7.57 percent9.09 percent9.25 percent11.25 percent

The correct answer is 9.25 percent.

Answered: What is Curtis's after-tax rate of…

Business

Accounting

What is Curtis's after-tax rate of return on the city of Athens bond?

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

20th Edition

ISBN:9780357110362

Author:Murphy

Publisher:Murphy

Chapter4: Income Exclusions

Section: Chapter Questions

Problem 87TPC

See similar textbooks

Similar questions

Curtis invests $800,000 in a city of Athens bond that pays 5 percent interest. Alternatively, Curtis could have invested the $800,000 in a bond recently issued by Initech, Incorporated that pays 7 percent interest with similar risk as the city of Athens bond. Assume that Curtis's marginal tax rate is 24 percent. How much implicit tax would Curtis pay on the city of Athens bond?
Curtis invests $250,000 in a city of Athens bond that pays 7 percent interest. Alternatively, Curtis could have invested the $250,000 in a bond recently issued by Initech, Incorporated that pays 9 percent interest with similar risk as the city of Athens bond. Assume that Curtis's marginal tax rate is 24 percent. What is Curtis's after-tax rate of return on the city of Athens bond?
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 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 25 percent. How much explicit tax would she have paid on the Surething Incorporated bond? What is her after-tax rate of return on the Surething Incorporated bond?
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 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?
Dana intends to invest $60,000 in either a Treasury bond or a corporate bond. The Treasury bond yields 5 percent before tax and the corporate bond yields 6 percent before tax. Required: a-1. Assuming Dana’s federal marginal rate is 24 percent and her marginal state rate is 5 percent, which of the two options should she choose? Assume that Dana itemizes deductions. a-2. How much interest after-tax would Dana earn by investing in the corporate bond? Note: Do not round intermediate calculations and round your final answer to the nearest whole dollar amount. b-1. If she were to move to another state where her marginal state rate would be 10 percent, which of the two options should she choose? Assume that Dana itemizes deductions. b-2. How much interest after-tax would Dana earn by investing in the corporate bond as per requirement b-1? Note: Do not round intermediate calculations and round your final answer to the nearest whole dollar amount.
An investor is trying to decide between a muni paying 6.20 percent or an equivalent taxable corporate paying 8.25 percent. What is the minimum marginal tax rate the investor must have to consider buying the municipal bond? 20.0 percent 66.7 percent 80.0 percent 25.0 percent 75.0 percent
Assume that John's marginal tax rate is 37 percent. If a city of Austin bond pays 6.5 percent interest, what interest rate would a corporate bond have to offer for John to be indifferent between the two bonds? Question 4 Marc, & married taxpayer, earns 5640,000 in taxable income and $8,300 in interest from an investment in city of Birmingham bonds. Using the U.S. tax rate schedule for year 2022, what is his current marginal tax rate? (Use tax rate schedule.)
An investor is trying to decide between a muni paying 6.20 percent or an equivalent taxable corporate paying 8.25 percent. What is the minimum marginal tax rate the investor must have to consider buying the municipal bond? Group of answer choices 20.0 percent 66.7 percent 80.0 percent 25.0 percent 75.0 percent
Melinda invests $330,000 in a City of Heflin bond that pays 4.8 percent interest. Melinda could have invested the $330,000 in a bond recently issued by surething incorporated that pays 8 percent interest and has risk and other characteristics similar to the city of Heflin bond. Assume Melinda’s marginal tax rate is 40 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 to paid on the sure thing incorporated bond? E. What is her after tax of return on the sure thing incorporated bond?
Dana intends to invest $66,000 in either a Treasury bond or a corporate bond. The treasury bond yields 5 percent before tax, and the corporate bond yields 6 percent before tax. Assume Dana's federal marginal rate is 24 percent and she itemizes deductions. a-2. How much interest after-tax would Dana earn by investing in the corporate bond? b-1. If she were to move to another state where her marginal state rate would be 10 percent, which of the two options should she choose? b-2. How much interest after-tax would Dana earn by investing in the corporate bond as per requirement b-1?
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 rate of return to one decimal place. 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 ___% ?
An investor purchases one municipal bond and one corporate bond that pay rates of return of 9% and 10.5%, respectively. If the investor is in the 20% tax bracket, his after-tax rates of return on the municipal and corporate bonds would be, respectively, _____.