Answers
Adeo-tay date of return) - Prelax wale of pehm - 67. Since the caty of Hef190 bond ls tax exempt. b. Melenda pays no chy Explecat tax yo no any Explc tax smce the Chy of Hefe bond Ps tax exempt bond. Explocot tax = $0 C.
Interest earned on City - Hef in bond (649x $350,000) $22,400 Interest paid by simplar porced taxable bordi.e, the Surethana, Inc bond (84 $350,000) $ 28,000 Implicht tox peened by Melmda *28000 - $ 22,400) $ 5,600 d. Emplacet taxs Interest peeld by sudething, Inc bond = $28000x 201, => $28.000 x 20/100 = $ 5,600 e. After-tax rate of relom = $ 22,400 $ 350,000 = 6.4% * Hugh's after tax date of return on the tax exempt city of Hellpo bond Ps 7-6 percent. The scroething bond pays taxable roterest 0-10.6 percent. Hugh's afles tax rate om zero on the suroestling bonde os 6.4 percencielo.67.
Potetest Pincome-19.67. X HOZ) tax=6:47) CO. 106 -CO:100XO-HO) = 6:36 4. 66.4%)] · Hugh Hugh should guest in the city of He Flen bord) * To be Indifferent benoeeo fresting Po the theo bonds, the Sudething, Inc. bond Shoceld poov?de state o ferge the same after-tax vote of vervo as the state of Necoyork bond CG-9 percent).
To solve for the sequired poetax date of com we can use the following foomela After-tex petoro = poetax cetoon x (l-Marq pal tax rate) suvething ,Inc needs to offer 9.86 Tercent merest cate to generale a 6.9 porocent after-tex petom and make Foogpe Podifferent between Investing on the two bords ie 6.9% = pre tax retron x C1-307.); poe tax wetson = 6o97C1-309.) >> 0-069/0.7 poetax retoon = 9.86 y. : Interest oale - 9.86 y.