What is after-tax rate on the abc bond

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Reference no: EM133007320

Problem 1: Company ABC is a for-profit company. ABC offers an 8 percent interest rate on its bonds. Company DEF is a not-for-profit firm that issued municipal bonds with similar risk offering 5.7 percent interest. You are an investor with a tax rate of 35 percent. What is your after-tax rate on the ABC bond, and which bond should you invest in?

Group of answer choices

Option 1: 12.35; invest in the ABC bond.

Option 2: 2.3%; invest in the DEF bond.

Option 3: 12.35; invest in the DEF bond.

Option 4: 5.2%; invest in the DEF bond.

Option 5: 2.3%; invest in the ABC bond.

Option 6: 6.3%; invest in the ABC bond.

Option 7: 6.3%; invest in the DEF bond.

Option 8: 5.2%; invest in the ABC bond.

Reference no: EM133007320

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