Question

An investor purchases one municipal and one corporate bond that pay rates of return of 7.2% and 9.1%, respectively. If the investor is in the 15% marginal tax bracket, his or her after-tax rates of return on the municipal and corporate bonds would be ________ and ______, respectively. Group of answer choices 6.12%; 7.735% 7.2%; 9.1% 8.471%; 9.1% 7.2%; 7.735%

Answer 1

Answer:

7.2%; 7.735%

Explanation:

The computation is shown below:

For municipal bonds

= Rate of return

= 7.2%

For corporate bonds

= Rate of return × (1 - marginal tax rate)

= 9.1% × (1 - 0.15)

= 9.1% × 0.85

= 7.735%

Hence, the last option is correct

And, the same is to be considered

We simply applied the above formulas so that the correct percentage could come