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

question 108

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:

Mechanic's Lien

A security interest granted over an item of property to ensure the payment of the work performed and materials supplied in the building or repairing of that property.

UCC

This extensive legal framework, the Uniform Commercial Code, establishes the rules governing commercial transactions in the United States.

Tenders

Formal offers to carry out work, supply goods, or buy land, goods, or services at a specified price.

Security Interest

A legal claim or lien on collateral, which gives the holder the right to seize property if the debtor fails to meet the obligations of a loan or agreement.