document.write( "Question 976955: blaze Bledsoe is in a 33% tax bracket. Blaze is considering purchasing some bonds. He can purchase tax-exempt bonds offered by Baptist health system that have an interest (coupon) rate of 6 1/4%. or he can purchase community health systems taxable bonds that pay 10 1/4% interest annually. Given that the risk is the same on the two bonds, which one should Blaze purchase and why \n" ); document.write( "
Algebra.Com's Answer #598480 by jim_thompson5910(35256)\"\" \"About 
You can put this solution on YOUR website!
Let's assume each bond's face value is $1000\r
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\n" ); document.write( "\n" ); document.write( "Baptist Health System:
\n" ); document.write( "(6 & 1/4)% of 1000 = 0.0625*1000 = 62.50
\n" ); document.write( "No taxes paid since these bonds are tax exempt\r
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\n" ); document.write( "\n" ); document.write( "Community Health Systems:
\n" ); document.write( "(10 & 1/4)% of 1000 = 0.1025*1000 = 102.50
\n" ); document.write( "33% of 102.5 = 0.33*102.5 = 33.825 = 33.83 in taxes paid
\n" ); document.write( "102.50 - 33.83 = 68.67\r
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\n" ); document.write( "\n" ); document.write( "With the Baptist Health System bond, he nets $62.50 per year in coupon payments.
\n" ); document.write( "With the Community Health Systems bond, he nets $68.67 per year in coupon payments.\r
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\n" ); document.write( "\n" ); document.write( "Both have the same amount of risk, so Blaze should choose the Community Health Systems bond.\r
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