Tonya, who lives in California, inherited a $100,000 State of California bond in 2018. Her marginal...

80.2K

Verified Solution

Question

Accounting

Tonya, who lives in California, inherited a $100,000 State ofCalifornia bond in 2018. Her marginal Federal tax rate is 35%, andher marginal state tax rate is 5%. The California bond pays 3.3%interest, which is not subject to California income tax. She canpurchase a corporate bond of comparable risk that will yield 5.2%or a U.S. government bond that pays 4.6% interest. Hint: Don'tforget to calculate any potential federal tax savings from adeduction from CA state taxes. What is the after-tax income formeach bond?

Answer & Explanation Solved by verified expert

4.5 Ratings (978 Votes)

Answer U S Government Bond Interest payment 46 Interest on U S Government Bond is taxable at Federal level only Hence after tax income from U S Government Bond Interest rate 1 marginal Federal Tax 46 1 35 299 California See Answer

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

Transcribed Image Text

Tonya, who lives in California, inherited a $100,000 State ofCalifornia bond in 2018. Her marginal Federal tax rate is 35%, andher marginal state tax rate is 5%. The California bond pays 3.3%interest, which is not subject to California income tax. She canpurchase a corporate bond of comparable risk that will yield 5.2%or a U.S. government bond that pays 4.6% interest. Hint: Don'tforget to calculate any potential federal tax savings from adeduction from CA state taxes. What is the after-tax income formeach bond?