Curtis invests $250,000 in a city of Athens bond that pays 7% interest. Alternatively, Curtis 8c6o)uld have invested the $250,000 in a bond recently issued by Initech, Inc. that pays 9% interest with similar risk as the city of Athens bond. Assume that Curtis' marginal tax rate is 28%.How much explicit tax would Curtis incur on interest earned on the Initech, Inc. bond?
A) $12,600
B) $6,300
C) $16,200
D) $4,900
E) None of the choices are correct.

Question

Quizplus · Accepted Answer

The explicit tax is calculated on the interest earned from the Initech bond. The interest earned is $250,000 * 9% = $22,500. The tax on this interest at a 28% tax rate is $22,500 * 28% = $6,300.

Curtis Invests $250,000 in a City of Athens Bond That