Question 976955
Let's assume each bond's face value is $1000



Baptist Health System:
(6 & 1/4)% of 1000 = 0.0625*1000 = 62.50
No taxes paid since these bonds are tax exempt



Community Health Systems:
(10 & 1/4)% of 1000 = 0.1025*1000 = 102.50
33% of 102.5 = 0.33*102.5 = 33.825 = 33.83 in taxes paid
102.50 - 33.83 = 68.67



With the Baptist Health System bond, he nets $62.50 per year in coupon payments.
With the Community Health Systems bond, he nets $68.67 per year in coupon payments.



Both have the same amount of risk, so Blaze should choose the Community Health Systems bond.


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