Ariel Invests $50,000 in a City of Las Vegas Bond

question 51

Essay

Ariel invests $50,000 in a city of Las Vegas bond that pays 5 percent interest.Alternatively, Ariel could have invested the $50,000 in a bond recently issued by Jittery Joe's, Inc.that pays 8 percent interest with similar non-tax characteristics as the city of Las Vegas bond (e.g., similar risk).Assume that Ariel's marginal tax rate is 24 percent.What is her after-tax rate of return for the city of Las Vegas bond? For the Jittery Joe's, Inc.bond? How much explicit tax does Ariel pay on the city of Las Vegas bond? How much implicit tax does she pay on the city of Las Vegas bond? How much explicit tax would she have paid on the Jittery Joe's, Inc.bond? Which bond should she choose?

---

Definitions:

PRN Order

A "pro re nata" prescription, indicating that the medication should be taken as needed, rather than on a fixed schedule.

Standing Order

A pre-approved instruction for the treatment of patients meeting specific criteria, allowing for immediate action without direct consultation each time.

STAT Order

A medical order requiring immediate action, often used in situations of urgent patient care.

Conjunctival Sac

The space between the inner lining of the eyelid and the surface of the eye, where contact lenses and eye medications are often placed.