Jackson has the choice to invest in city of Mitchell bonds or Sundial, Inc. corporate bonds...

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Jackson has the choice to invest in city of Mitchell bonds or Sundial, Inc. corporate bonds that pay 8.4 percent interest. Ja

business accounting

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Answer 1

Answer #1

Jackson is in the tax bracket $39,475 - $84,200 which is taxed at 22%

After tax tax rate on corporate bonds = 8.4%*(1-22%)= 6.55%

City of Mitchell would have to pay 6.55 percent to make Jackson indifferent.

6.55 percent is interest rate.

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Answer 2

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