Question: a. Chuck, a single taxpayer, earns $70,000 in taxable income and $10,000 in interest from an investment in City of Heflin bonds. If Chuck earns an additional $40,000 of taxable income, what is his marginal tax rate on this income?
b. Chuck, a single taxpayer, earns $70,000 in taxable income and $10,000 in interest from an investment in City of Heflin bonds. If Chuck claims an additional $40,000 of deductions, what is his marginal tax rate on this income?
c. Melinda invests $100,000 in a City of Heflin bond that pays 3 percent interest. Alternatively, Melinda could have invested the $100,000 in a bond recently issued by Surething, Inc. that pays 4 percent interest with similar risk and other nontax characteristics to the City of Heflin bond. Assume Melinda's marginal tax rate is 25 percent. What is her after-tax rate of return on the Surething, Inc. bond?