Curtis invests $250,000 in a city of Athens bond that pays 7 percent interest. Alternatively, Curtis could have invested the $250,000 in a bond recently issued by Initech, Incorporated that pays 9percent interest with similar risk as the city of Athens bond. Assume that Curtis's marginal tax rate is 24 percent. What is Curtis's after-tax rate of return on the city of Athens bond?
A)5)32 percent
B)6)84 percent
C)7)00 percent
D)9)00 percent
E)None of the choices are correct

Question

Quizplus · Accepted Answer

The city of Athens bond is typically tax-exempt, so Curtis's after-tax rate of return is the same as the bond's interest rate, which is 7.00 percent.

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