Self-Study Questions
| 1. | FunSoft has a loan with an interest rate of 7% and an effective income tax rate of 30%. What is the effective after-tax interest rate on their loan? |
| 2. | Blizzard Systems has an effective income tax rate of 35.5%. They also have a loan with an interest rate of 6.75%. What is the effective after-tax interest rate on their loan? |
| 3. | Ms. D has $10,000 available to invest. She can buy a $10,000 6-year municipal bond at face value that has an interest rate of 7%. Another possibility is for her to buy a 6-year corporate bond with an interest rate of 9%. Ms. D has an effective income tax rate of 24%. Which of these bonds would be better for her from an after-tax perspective? |
| 4. | Mr. S has $5000 to invest. He can buy a 5-year municipal bond ... |
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