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CFP Certified Financial Planner Test Prep

Category - Foundation

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If the compound interest on a company’s irredeemable bonds is 8% and the tax rate is 15%, what would be cost of the bond after tax if the bond's market value is $110.

4.6%
5.2%
3.6%
4.5%

Explanation

Answer: A - The after-tax cost of the bond is 8(1 - 0.15)/110 = 0.04636 x 100 = 4.636%.

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