Assume that Lavonias marginal tax rate is 20%. If a city of Tampa bond pays 5% interest, what interest rate would a corporate bond have to offer for Lavonia to be indifferent between the two bonds?
A. 20%
B. 8%
C. 7%
D. 4%
E. None of these
Answer: E
Tax MCQ
Tax Chapter 3
Assume that Lavonias marginal tax rate is 20%. If a city of Tampa bond pays 5% interest, what interest rate would a corporate bond have to offer for Lavonia to be indifferent between the two bonds?