Question

An investor purchases one municipal bond and one corporate bond that pay rates of return of 5% and 6.4%, respectively. If the investor is in the 15% tax bracket, his after-tax rates of return on the municipal and corporate bonds would be, respectively,

Answer 1

5% and 5.44%

Step-by-step explanation:

municipal bond after tax is 0.5

corporate bond after tax is 0.64

so therefore: 0.64(1-0.15)=0.0544=5.44%

5% and 5.44%