1. Antonio would like to replace his gold clubs with a custom-measured set. A local sporting goods megastore is advertising custom clubs for $520, including a new bag. In-store financing is available at 3.93 percent, or he can choose not to renew his $300 certificate of deposit (CD), which just matured. The advertised CD renewal rate is 5.08 percent. Antonio knows the in-store financing costs would not affect his taxes, but he knows he’ll pay taxes (25 percent federal and 5.75 percent state) on the CD interest earnings.
The after-tax CD earnings rate is %