In Order for You to Be Indifferent Between the After-Tax

question 60

Multiple Choice

In order for you to be indifferent between the after-tax returns on a corporate bond paying 8.5% and a tax-exempt municipal bond paying 6.12%, what would your tax bracket need to be?

• A) 33%
• B) 72%
• C) 15%
• D) 28%
• E) Cannot be determined from the information given.

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Definitions:

Credit Sales

Sales made on credit, where the payment is received after the delivery of the goods or services.

Contra-Revenue

An account that offsets revenue accounts on the income statement, typically related to returns, allowances, and discounts.

Credit Sale

A transaction where goods or services are provided to a customer with the agreement that payment will be made at a later date.

Terms 3/10

A payment term indicating that a buyer can take a 3% discount on the invoice amount if the payment is made within 10 days of the invoice date.