Namratha Has the Choice Between Investing in a City of Watkinsville

question 35

Essay

Namratha has the choice between investing in a city of Watkinsville bond at 4.5% or a Moe's, Inc. bond at 7%. Assuming that both bonds have the same non-tax characteristics and that Namratha has a 32% marginal tax rate, in which bond should she invest? What interest rate offered by Moe's, Inc. would make Namratha indifferent between investing in the two bonds?

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