Accounting

posted by .

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?

  • Finance -

    Twin Cities bond, a non-profit corporation, the investor would have to pay no taxes on the interest and would be able to keep the entire amount.

Respond to this Question

First Name
School Subject
Your Answer

Similar Questions

  1. accounting

    Midland Oil has $1,000 par value bonds outstanding at 8 percent interest. The bonds will mature in 25 years. Compute the current price of the bonds if the present yield to maturity is: A. 7 percent. B. 10 percent. C. 13 percent.
  2. Accounting

    Jane Smith currently holds tax-exempt bonds of Good Samaritan Healthcare that pay 7 percent interest. She is in the 49 percent tax bracket. Her broker wants her to buy some Beverly Enterprises taxable bonds that will be issued next …
  3. accounting

    Assume Venture Healthcare sold bonds that have a ten-year maturity, a 12 percent coupon rate with annual payments, and a $1,000 par value. a. Suppose that two years after the bonds were issued, the required interest rate fell to 7 …
  4. Health care finance

    John Doe is in the 40 percent tax bracket. He is considering investing in HCA bonds that carry a 12 percent interest rate. A. What is his after-tax interest rate on the bonds?
  5. HealthCare Finance Bonds

    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?
  6. Finance Accounting

    One of the advantages of borrowing is that interest is deductible for income tax purposes. a. If a company pays 8 percent interest to borrow $500,000, but is in an income tax bracket that requires it to pay 40 percent income tax, what …
  7. Finance

    Jane Smith currently holds tax-exempt bonds of Good Samaritan Healthcare that pay 7 percent interest. She is in the 49 percent tax bracket. Her broker wants her to buy some Beverly Enterprises taxable bonds that will be issued next …
  8. finance

    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?
  9. Healthcare Finance

    Jane Smith currently holds tax-exempt bonds of Good Samaritan Healthcare that pay 7 percent interest. She is in the 40 percent tax bracket. Her broker wants her to buy some Beverly Enterprises taxable bonds that will be issued next …
  10. Finance

    Kim Davis is in the 40% personal tax bracket. She is considering investing in HCA (taxable) bonds that carry a 12% interest rate. a. What is her after-tax yield (interest rate) on the bonds?

More Similar Questions