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P10.5 (similar to) Question Help An investor lives in a state with a 6% tax rate....


P10.5 (similar to) Question Help An investor lives in a state with a 6% tax rate. Her federal income tax bracket is 35%. She
P10.5 (similar to) Question Help An investor lives in a state with a 6% tax rate. Her federal income tax bracket is 35%. She wants to invest in one of two bonds that are similar in terms of risk (and both bonds currently sell at par value). The first bond is fully taxable and offers a yield of 10.03%. The second bond is exempt from both state and federal taxes and offers a yield of 6.60%. In which bond should she invest? The after-tax yield of the first bond is %. (Round to two decimal places.) Enter your answer in the answer box and then click Check Check Answer 2 remaining 2 parts
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Answer #1

After tax yield of first bond=10.03%*(1-35%)=6.52%

After tax yield of second bond=6.60%

Invest in second bond which is tax exempt

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