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

question 66

Multiple Choice

Curtis invests $250,000 in a city of Athens bond that pays 7% interest. Alternatively, Curtis could 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's marginal tax rate is 24%. If Curtis invested in the Initech, Inc. bonds, what would be his after-tax rate of return from this investment?

• A) 5.32%
• B) 7.00%
• C) 6.84%
• D) 2.52%
• E) None of the choices are correct.

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Definitions:

Method of Doubt

A philosophical methodology attributed to René Descartes involving skepticism towards one's beliefs to discover what can be known with certainty.

Descartes

René Descartes, a French philosopher, mathematician, and scientist, considered the father of modern philosophy, known for his statement "I think, therefore I am."

Universal Causality

The principle that every event or state of affairs is determined by preceding events according to consistent laws.

David Hume

An 18th century Scottish philosopher, famous for his skepticism and empiricism.