You can invest in taxable bonds that are paying a yield of 9.9 percent or a municipal bond paying a yield of 8.15 percent.

You can invest in taxable bonds that are paying a yield of 9.9 percent or a municipal bond paying a yield of 8.15 percent. Assume your marginal tax rate is 28 percent.

a. Calculate the after-tax rate of return on the taxable bond? (Round your percentage answers to 2 decimal places. (e.g., 32.16))
b. Which security bond should you buy?

 

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Rate of return7.13%

b. The security bond one should buy is: Municipal bond paying a 8.15 percent annual rate of return.