Put the Following Securities in Order According to Their After-Tax

question 41

Essay

Put the following securities in order according to their after-tax interest rates, from lowest to highest.The federal tax rate on interest income is 30 percent.Show your work.
A: A corporate bond that pays an interest rate of 6 percent.B: A corporate bond that pays an interest rate of 7 percent.
C: A local government bond identical that pays an interest rate of 4.5 percent.

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Definitions:

Earned Income

Income derived from active participation in a business or trade, typically including wages, salaries, commissions, and tips.

Unearned Income

Refers to money received that does not come from employment, work, or business activities, such as dividends, interest, or government benefits.

Medical Deduction

An itemized deduction on personal income taxes for expenses related to healthcare beyond a certain percentage of adjusted gross income.

Adjusted Gross Income

Adjusted Gross Income (AGI) refers to an individual's total gross income minus specific deductions, used to determine taxable income on an income tax return.