Curtis invests $250,000 in a city of Athens bond that pays 7% interest.Alternatively,Curtis could 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's marginal tax rate is 24%. What is Curtis's after-tax rate of return on the city of Athens bond?

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Quizplus · Accepted Answer

The interest from city bonds is typically tax-exempt, so Curtis's after-tax rate of return on the city of Athens bond is the same as the stated interest rate, which is 7%.

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