You can invest in taxable bonds that are paying a yield of 8.3 percent or a municipal bond paying a yield of 6.85 percent. Assume your marginal tax rate is 28 percent.
a. Calculate the after-tax rate of return on the taxable bond? (Round your answer to 2 decimal places.(e.g., 32.16))
Rate of return %
b. Which security bond should you buy?
Taxable bonds that are paying a 8.3 percent annual rate of return.
Municipal bond paying a 6.85 percent annual rate of return.