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QUESTION
Hugh has the choice between investing in a City of Heflin bond at 5.25 percent or a Surething bond at 7.75 percent.
Hugh has the choice between investing in a City of Heflin bond at 5.25 percent or a Surething bond at 7.75 percent. Assume 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?
