Hello teacher please help me this question solution Your bank has two checking account options, one pays tax-free interest at arate of 2% per annum and the other pays taxable interest at a rate of 3% perannum. You are currently in a 25% marginal tax bracket. If you converted thetax-free interest rate to the comparable taxable interest rate, you would findthat:A. The comparable taxable rate is 2.667%, thus you would select the taxableaccount.B. The comparable taxable rate is 2.35%, thus you would select the taxableaccount.C. The comparable taxable rate is 3.53%, thus you would select the tax-freeaccount.D. You would always select the account bearing the highest interest rate.

Calculation:Tax-free interest rate: 2%=0.02Marginal tax rate: 25%=0.25The formula for the comparable…

Answered: Your bank has two checking account…

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter5: The Time Value Of Money

Section: Chapter Questions

Problem 4QTD

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