Question

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 28%.

Answer 1

I guess the correct answer is 6.48%

If Curtis invested in the Initech, Inc. bonds, The after-tax rate of return from this investment is 6.48%.

Since, [(1 - 0.28) × (250,000 × .09)]/250,000 = .0648.