After Tax Rate of Return Assignment
Melinda invests $230,000 in a City of Heflin bond that pays 8 percent interest. Alternatively, Melinda could have invested the $230,000 in a bond recently issued by Surething Inc., that pays 10 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:
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 paid on the Surething Inc. bond?
e. What is her after-tax rate of return on the Surething Inc. bond?
a.After-tax rate of return
b. Explicit tax
c. Implicit tax
d. Explicit tax
e. After-tax rate of return. Get Finance homework help today
