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Tonya, who lives in California, inherited a $100,000 State of California bond in 2018. Her marginal...

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Accounting

Tonya, who lives in California, inherited a $100,000 State ofCalifornia bond in 2018. Her marginal Federal tax rate is 35%, andher marginal state tax rate is 5%. The California bond pays 3.3%interest, which is not subject to California income tax. She canpurchase a corporate bond of comparable risk that will yield 5.2%or a U.S. government bond that pays 4.6% interest. Hint: Don'tforget to calculate any potential federal tax savings from adeduction from CA state taxes. What is the after-tax income formeach bond?

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Answer U S Government Bond Interest payment 46 Interest on U S Government Bond is taxable at Federal level only Hence after tax income from U S Government Bond Interest rate 1 marginal Federal Tax 46 1 35 299 California    See Answer
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Transcribed Image Text

Tonya, who lives in California, inherited a $100,000 State ofCalifornia bond in 2018. Her marginal Federal tax rate is 35%, andher marginal state tax rate is 5%. The California bond pays 3.3%interest, which is not subject to California income tax. She canpurchase a corporate bond of comparable risk that will yield 5.2%or a U.S. government bond that pays 4.6% interest. Hint: Don'tforget to calculate any potential federal tax savings from adeduction from CA state taxes. What is the after-tax income formeach bond?

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