Juan Was Considering Purchasing an Interest in a Tax-Exempt Bond

question 29

Essay

Juan was considering purchasing an interest in a tax-exempt bond fund for $100,000 when he discovered that the interest must be included on his state income tax return.The interest rate is 5%.His marginal Federal tax rate is
35%, and his marginal state income tax rate is 10%.Juan itemizes his deductions on his Federal income tax return.As an alternative, Juan can purchase a state bond (a double-exempt bond) yielding 4.9% interest that is exempt from both Federal and state income tax.Which investment would yield the greater after-tax return?

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Definitions:

Typological Approach

Theoretical approach that identifies broad personality types, or styles.

Personality Development

The continuous growth and evolution of an individual’s personality throughout life, influenced by both genetic factors and environmental impacts.

Ego-resilient

Refers to the ability of an individual to adapt flexibly and recover from stress or adversity.

Five-factor Model

A theory in psychology that identifies five main dimensions of human personality: openness, conscientiousness, extraversion, agreeableness, and neuroticism.