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

question 30

Multiple Choice

Curtis invests $250,000 in a city of Athens bond that pays 7% interest. Alternatively, Curtis 8c3o) uld 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' marginal tax rate is 28%.What is Curtis' after-tax rate of return on the city of Athens bond?

• A) 7.00%
• B) 1.96%
• C) 2.52%
• D) 9.00%
• E) None of the choices are correct.

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Definitions:

Conditioned Response

A learned response to a previously neutral stimulus that has become associated with an unconditioned stimulus.

Taste Aversion

Taste aversion is a learned response to eating spoiled or toxic food, leading to an aversion to that food in the future.

Classical Conditioning

An associative conditioning method where repeated linkage of two stimuli leads to a response initially caused by the second stimulus, eventually being caused by the first stimulus alone.

Habituation

The psychological process of becoming accustomed to a stimulus after repeated exposure, leading to a decrease in response.