1. A tax-free municipal bond promises a return of 3.5%. A taxable bond promises a return of 4.5%. If your tax bracket is 20%, what is the taxable equivalent return of the tax-free municipal bond?
4.24%
2.8%
3.6%
4.38%
2. You have $50,000 to invest and are considering a portfolio which includes one risk-free asset and two risky assets (X and Y). The risk-free return is 5% and the returns for X and Y are 25% and 12% respectively. The optimal risky asset combination is 70% X and 30% Y. If you want a target return of 18% from this portfolio, how much money should you invest in asset Y?
12,111.80
28,260.87
9,627.32
16.517.92
31,271.08