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

question 104

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%. How much explicit tax would Curtis incur on interest earned on the Initech,Inc.bond?

• A)$17,500
• B)$5,400
• C)$4,200
• D)$12,600
• E)None of the choices are correct.

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Definitions:

Accounting Profit

Accounting profit is the monetary gain calculated by subtracting total explicit costs from total revenue.

Sunk Cost

A cost that has already been incurred and cannot be recovered, and therefore should not affect current and future business decisions.

Nonrefundable Ticket

A type of ticket for which the cost is not returned to the purchaser if they decide to cancel their booking or are unable to use the ticket.

Soccer Match

A competitive game of soccer played between two teams, adhering to specific rules and durations as specified by the sport's governing body.