Curtis Invests $775,000 in a City of Athens Bond That

question 126

Multiple Choice

Curtis invests $775,000 in a city of Athens bond that pays 9.75 percent interest. Alternatively, Curtis could have invested the $775,000 in a bond recently issued by Initech, Incorporated that pays 12 percent interest with similar risk as the city of Athens bond. Assume that Curtis's marginal tax rate is 24 percent. What is Curtis's after-tax rate of return on the city of Athens bond?

• A)8)07 percent
• B)9)59 percent
• C)9)75 percent
• D)11.75 percent
• E)None of the choices are correct

---

Definitions:

Temporal Method

An accounting technique used to convert the financial statements of a subsidiary into the parent company's currency by using the exchange rates in effect at the time the assets and liabilities were acquired.

Translation Exchange Rates

Rates used to convert the financial statements of a foreign subsidiary to the reporting currency of the parent company.

Historical Rate

The exchange rate used to convert transactions in foreign currencies to a domestic currency, based on the rate at the time of the transaction.

Self-Contained Unit

A segment or part of a business that operates independently or contains all necessary elements to function independently.