Assume that Javier is indifferent between investing in a city of El Paso bond that pays...

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Assume that Javier is indifferent between investing in a city of El Paso bond that pays...

Assume that Javier is indifferent between investing in a city of El Paso bond that pays 4.05 percent interest and a corporate bond that pays 5.7 percent interest. What is Javier's marginal tax rate?

		None of the choices are correct.
		48.95 percent.
		28.95 percent.
		38.95 percent.
		81.48 percent.

business accounting

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Answer 1

Answer #1

Marginal tax rate should be calculated as follows

Interest of corporate bond X (1 - marginal tax rate) = Interest of El Paso Bond

5.7% X (1 - MTR) = 4.05%

MTR = 1 - 4.05/5.7

MTR = 1 - 0.7105

MTR = 28.95%

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Answer 2

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