What is his after-tax yield interest rate on the bonds? , Ask an Expert

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John Doe is in the 40 percent personal tax bracket. He is considering investing in HCA bonds that carry a 12 percent interest rate.

a. What is his after-tax yield (interest rate) on the bonds?

b. Suppose Twin Cities Memorial Hospital has issued tax-exempt bonds that have an interest rate of 6 percent. With all else the same, should John buy the HCA or the Twin Cities bonds?

c. With all else the same, what interest rate on the tax-exempt Twin Cities bonds would make John indifferent between these bonds and the HCA bonds?

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Basic Finance, Finance

Category:- Basic Finance
Reference No.:- M952666

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