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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?

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Answer for the question :

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?

is explained below.

Explanation:

the after-tax rate of return on the taxable bond = 9.4%*(1-0.21)

the after-tax rate of return on the taxable bond = 7.426%

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