You can invest in taxable bonds that are paying a yield of 9.4 percent or a municipal bond paying a yield of 7.65 percent. Assume your marginal tax rate is 21 percent. a. Calculate the after-tax rate of return on the taxable bond? (Round your answer to 2 decimal places. (e.g.. 32.16)) b. Which security bond should you buy? a. b. Rate of return The security bond one should buy is:

Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
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You can invest in taxable bonds that are paying a yield of 9.4 percent or a municipal bond paying a yield of 7.65 percent. Assume your
marginal tax rate is 21 percent.
a. Calculate the after-tax rate of return on the taxable bond? (Round your answer to 2 decimal places. (e.g., 32.16))
b. Which security bond should you buy?
a
b.
Rate of return
The security bond one should buy is
%
Transcribed Image Text:You can invest in taxable bonds that are paying a yield of 9.4 percent or a municipal bond paying a yield of 7.65 percent. Assume your marginal tax rate is 21 percent. a. Calculate the after-tax rate of return on the taxable bond? (Round your answer to 2 decimal places. (e.g., 32.16)) b. Which security bond should you buy? a b. Rate of return The security bond one should buy is %
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