Logo
Home Study Material Contact Search
AI Chat FREE
  1. business
  2. accounting
  3. dana intends to invest $66,000 in either a treasur

Dana intends to invest $66,000 in either a treasury bond or a corporate bond. The Treasury...

Free

70.2K

Verified Solution

Question

Accounting

Dana intends to invest $66,000 in either a treasury bond or acorporate bond. The Treasury Bond yields 5 percent before tax andthe corporate bond yields 6 percent before tax.

A) Assuming dana's federal marginal rate is 24 percent and hermarginal state rate is 5 percent, which of the two options shouldshe choose? Assume the Dana itemizes deductions

Corporate bonds

Treasury Bonds

A2) How much interest after-tax would Dana earn by investing inthe corporate bond?

B) if she were to move to another state were her marginal staterate would be 10 percent, which of the two options should shechoose? Assume that Dana itemizes deductions

Corporate Bonds

Treasury Bond

B2) how much interest after-tax would Dana earn by investing inthe corporate bond as per requirement B)?

Answer & Explanation Solved by verified expert
4.3 Ratings (760 Votes)

A1 & A2
Treasury Bonds Corporate Bonds
After-tax rate of return 0.05*(1-0.24) 0.06*(1-0.24-0.05*(1-0.24))
0.038 0.04332
Interest 66000*0.038 66000*0.04332
$         2,508.00 $                               2,859.12
The amount of interest yield on corporate bonds is more. Dana should choose corporate bonds
B1 & B2
Treasury Bonds Corporate Bonds
After-tax rate of return 0.05*(1-0.24) 0.06*(1-0.24-0.10*(1-0.24))
0.038 0.04104
Interest 66000*0.038 66000*0.04104
$         2,508.00 $                               2,708.64
The amount of interest yield on corporate bonds is more. Dana should choose corporate bonds

Get Answers to Unlimited Questions

Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!

Membership Benefits:
  • Unlimited Question Access with detailed Answers
  • Zin AI - 3 Million Words
  • 10 Dall-E 3 Images
  • 20 Plot Generations
  • Conversation with Dialogue Memory
  • No Ads, Ever!
  • Access to Our Best AI Platform: Flex AI - Your personal assistant for all your inquiries!
Become a Member

Other questions asked by students

Physics
1.2K views

An electron is bound to a finite potential well. (a) If the width of the well...

Physics
1.2K views

a toy rocket is fired fired at rest vertically upwards and accelerates at a constant rate....

Basic Math
1.2K views

1. Use the geometric probability distribution to solve the following problem. On the leeward side of the...

Physics
1.2K views

In the adjoining circuit diagram each resistance 6 is of 10 2 The current in...

Basic Math
1.2K views

Chapter 3 exercise 3 7 a Prepare a balance sheet and income statement for Kronlokken...

Basic Math
1.2K views

If c is an explanatory variable and dis the corresponding response variable, which of these...

Statistics
1.2K views

Question 13 2 points The elements for a valid contra a fair price

Calculus
1.2K views

Correct the following statement.log2 8 = 4Use fx to type math equations.

Calculus
1.2K views

Next question Get a similar Suppose that f is a function given as f x...

Algebra
1.2K views

Expand the following using the Binomial Theorem or Pascal s Triangle Ox 243 x 15x...

Accounting
1.2K views

Exercise 14-7 (Algo) Net Present Value Analysis of Two Alternatives [LO14-2] Perlt Industrles has $155,000...

Accounting
1.2K views

2.00 points The budgeted unit sales of Weller Company for the upcoming fiscal year are...