Assume that Johns marginal tax rate is 40%. If a city of Austin bond pays 6% interest, what interest rate would a corporate bond have to offer for John to be indifferent between the two bonds?
A. 30%
B. 10%
C. 6%
D. 3.6%
E. None of these
Answer: B
Tax MCQ
Tax Chapter 3
Assume that Johns marginal tax rate is 40%. If a city of Austin bond pays 6% interest, what interest rate would a corporate bond have to offer for John to be indifferent between the two bonds?