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grandymaker [24]
3 years ago
8

Hugh has the choice between investing in a city of heflin bond at 6.60 percent investing in a surething bond at 10.00 percent. a

ssuming that both bonds have the same nontax characteristics and that hugh has a 40 percent marginal tax rate, what interest rate does surething inc., need to offer to make hugh indifferent between investing in the two bonds?
Business
1 answer:
butalik [34]3 years ago
8 0

Answer: Surething Inc, needs to issue bonds with 11% interest rate in order to make Hugh indifferent between investing in two bonds.

We arrive at the answer in the following manner:

The City of Helfin bonds are municipal bonds and hence they are tax free. This means that Hugh will get an after - tax return of 6.6%.

The bonds of Surething Inc offering a 10% interest, however are taxed at 40%. So, the current after-tax returns of the bond is:

After - tax return= Pre- tax return * (1 -tax rate)

After-tax return= 0.1 * (1-0.4)

Current after tax return = 0.06 or 6%

However Hugh will be indifferent to investing in these two bonds only if they offer the same after-tax return of 6.6%.

Given this, we can calculate the indifference rate as follows:

After - tax return= Pre- tax return * (1 -tax rate)

0.066= Pre- tax return * (1 -0.4)

\frac{0.066}{0.6}= Pre-tax return

Pre-tax return = 0.11 or 11%.

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Answer:Jamie's gross tax liability is $19,572.50

Explanation:

Since Jamie is single with taxable income of $108,000 which  includes $5,800 long term capital gain.

Therefore  $102,200 (108,000 -5,800) will be taxed under normal tax rates and $5,800 would be under long term capital gain tax rate.

With regards the 2020 tax schedule,  Since her ordinary income is  $102,200, Jamie falls under 24% rate tax bracket under filing for single status.

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Tax liability on ordinary income =$14,382.50 plus 24% of any income you made above $84,200

14,382.50 + 0.24 (102,200 - 84,200)

14,382.50 + 0.24 x 18000

                 = 14,382.50 + 4,320

                 = $18,702.50

Also, according to her income, longterm capital gain tax applicable in 2020 is 15%

Tax on long term capital gain = 5,800 × 0.15

                                              = $870

Jamie's gross tax liability is $18,702.50 + 870 = $19,572.50

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This statement is true. Members of racial and ethnic minorities are frequently given lower-quality care and are less likely to obtain preventative health services than white people. Additionally, they experience worse health outcomes for a few illnesses.

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3 years ago
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brazil spent billions of dollars to host the soccer world cup and the summer olympics. the opportunity cost of hosting these eve
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The opportunity cost of hosting these events is the next best alternative bundle of goods and services that could be provided.

<h3>What is meant by opportunity cost?</h3>

This is the term that is used to talk about the foregone alternative. It is what would have to be neglected because of another choice that has to be taken.

What this means is that the money that would have been spent on other aspects of the government was spent on the world cup so the benefits that the people would have gotten from the options are lost.

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7 0
1 year ago
A manufacturer of handcrafted wine racks has determined that the cost to produce x units per month is given by upper c equals 0.
Fantom [35]

Answer:

The cost per month is increasing at a rate $365.

Explanation:

Differentiation Formula

  • \frac{d}{dx}(x^n)= nx^{n-1}  
  • \frac{d}{dx}(a)=0             [ where a is a constant]
  • \frac{d}{dx}(ax^n)=a \frac{d}{dx}(x^n)= anx^{n-1}

Given that,

A manufacturer of handcrafted wine racks has determined that the cost to produce x units per month is given by

c=0.2x^2+10,000.

Again given that,

the rate of changing production is 13 unit per month

i.e \frac{dx}{dt}=13

To find the cost per month, we need to find out the value \frac{dc}{dt} when production is changing at the rate 13 units per month and the production is 70 units.

c=0.2x^2+10,000

Differentiating with respect to t

\frac{d}{dt}(c)=\frac{d}{dt}(0.2x^2)+\frac{d}{dx}(10,000)

\Rightarrow \frac{dc}{dt}=0.2\frac{d}{dt}(x^2)+\frac{d}{dx}(10,000)

\Rightarrow \frac{dc}{dt}=0.2\times 2x^{2-1}\frac{dx}{dt}+0

\Rightarrow \frac{dc}{dt}=0.4x\frac{dx}{dt}

Plugging \frac{dx}{dt}=13

\Rightarrow \frac{dc}{dt}=0.4x\times 13

\Rightarrow \frac{dc}{dt}=5.2x

\frac{dc}{dt}|_{x=70}=5.2\times 70 [ plugging x=70]

            =364

[ The unit of c is not given. Assume that the unit of c is dollar.]

The cost per month is increasing at a rate $365.

4 0
3 years ago
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