Roy decides to buy a personal residence and goes to the bank for a $150,000 loan. the bank tells him that he can borrow the funds @ 4% if his father will guarantee the debt. roy’s father, hal, owns a $150,000 cd currently yielding 3.5%. the federal rat is 3%. hal agrees to either of the following: * roy borrows from the bank with hal’s guarantee to the bank * cash in the cd (with no penalty) and lend roy the funds at 2% interest. hal is in the 33% marginal tax bracket. roy, whose only source of income is his salary, is in the 15% marginal tax bracket. the interest roy pays on the mortgage will be deductible by him. which option will maximize the family’s after-tax wealth?
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Roy decides to buy a personal residence and goes to the bank for a $150,000 loan. the bank tells him...
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