Answer = 6.72%
Explanation:
To be indifferent between investing in the two bonds, the State of New York bond should provide Fergie the same after-tax rate of return as the Surething bond. Fergie's after tax rate of return on the Surething bond is 6.72 percent (i.e., 9.6% interest income - (9.6% × 30%) tax = 5.6%). The state of New York needs to offer a 6.72 percent interest rate to generate a 6.72 percent after-tax return to make Fergie indifferent between investing in the two bonds.
I have given complete and detailed explanation to your problem, in case of any query you can comment and
PLEASE DO GIVE POSITIVE RATING
Check my work 4 Fergie has the choice between investing in a State of New York...
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 =...
Fergie has the choice between investing in a State of New York bond at 57 percent and a Surething Inc, bond at 9 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
Fergie has the choice between investing in a State of New York bond at 7.5 percent and a Surething Inc, bond at 10.6 percent. Assuming that both bonds have the same nontax characteristics and that Fergie has a 30 percent marginal tax rate, in which bond should she invest? Fergie should invest in the Surething Inc. bond -
Fergie has the choice between investing in a State of New York bond at 6.9 percent and a Surething Inc. bond at 10.8 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...
Problem 1-46 (LO 1-3, LO 1-4) Fergie has the choice between investing in a State of New York bond at 3.8 percent and a Surething Inc. bond at 6.4 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...
Problem 1-45 (LO 1-3, LO 1-4) (Algo) Fergie has the choice between investing in a State of New York bond at 9.0 percent and a Surething Inc. bond at 10.1 percent. Assuming that both bonds have the same nontax characteristics and that Fergie has a 30 percent marginal tax rate, in which bond should she invest? Fergie should invest in the
Hugh has the choice between investing in a City of Heflin bond at 3.15 percent or investing in a Surething Inc. bond at 4.85 percent. Assuming that both bonds have the same nontax characteristics and that Hugh has a 40 percent marginal tax rate, what interest rate does Surething Inc. need to offer to make Hugh indifferent between investing in the two bonds? (Round your answer to 2 decimal places.) Interest rate Fergie has the choice between investing in a...
Melinda invests $350,000 in a City of Heflin bond that pays 6.4 percent interest. Alternatively, Melinda could have invested the $350,000 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 20 percent. (Leave no cells blank - be sure to enter "O" wherever required. Round your after-tax rate of return to one decimal place.) Required:...
Hugh has the choice between investing in a City of Heflin bond at 3.30 percent or investing in a Surething bond at 5.15 percent. Assuming that both bonds have the same nontax characteristics and that Hugh has a 40 percent marginal tax rate, what interest rate does Surething Inc., need to offer to make Hugh indifferent between investing in the two bonds? (Round your answer to 2 decimal places.)
Hugh has the choice between investing in a City of Heflin bond at 4.95 percent or investing in a Surething bond at 7.60 percent. Assuming that both bonds have the same nontax characteristics and that Hugh has a 40 percent marginal tax rate, what interest rate does Surething Inc., need to offer to make Hugh indifferent between investing in the two bonds? (Round your answer to 2 decimal places.)