Assume you are in 15% marginal tax bracket, you have two alternatives for investments. You can...
Assume you are in 15% marginal tax bracket, you have two alternatives for investments. You can invest in tax-free bonds that earns 7% or taxable bond that earn 8%. Which alternatives you should choose and why?
Homework Answers
post tax adjusted return on taxable bond=8%*(1-15%)=6.80%
tax free bond earn higher than the post tax adjusted return on taxable bond, so choose tax free bond
the above is answer..
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