Fergie has the choice between investing in a state of new york bond at 5.9 percent and a surething inc. bond at 9.4 percent. assuming that both bonds have the same nontax characteristics and that fergie has a 30 percent marginal tax rate, what interest rate does the state of new york bond need to offer to make fergie indifferent between investing in the two bonds?

the interest rate that the state of New York bond need to offer to make Fergie indifferent is 6.58%

Explanation:

After tax returning surething bond = 9.4%*(1-30) = 6.58%

when New York bond offers 6.58%,Fergie will be indifferent between investing in the two  bonds

Therefore, the interest rate that the state of New York bond need to offer to make Fergie indifferent is 6.58%

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