Fergie has the choice between investing in a State of New York bond at 4.7 percent...
Fergie has the choice between investing in a State of New York bond at 4.7 percent and a Surething bond at 7.6 percent. Assuming that both bonds have the same nontax characteristics and that Fergie has a 30 percent marginal tax rate, what interest rate does the state of New York bond need to offer to make Fergie indifferent between investing in the two bonds?
(Do not round intermediate calculations. Round your answer to 2 decimal places.)
Interest Rate = ___%
Homework Answers
Interest rate for state of New York bond to be indifferent=Interest rate for Surething bond*(1-tax rate)
=7.6(1-0.3)
which is equal to
=5.32%
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Fergie has the choice between investing in a State of New York
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