You can invest in taxable bonds that are paying a 8.2 percent annual rate of ret

Question

You can invest in taxable bonds that are paying a 8.2 percent annual rate of return or a municipal bond paying a 6.75 percent annual rate of return. Assume your marginal tax rate is 21 percent.

Calculate the after-tax rate of return on the taxable bond? (Round your answer to 2 decimal places.(e.g., 32.16))

You can invest in taxable bonds that are paying a 8.2 percent annual rate of return or a municipal bond paying a 6.75 percent annual rate of return. Assume your marginal tax rate is 21 percent.

Explanation / Answer

After tax rate of return on the taxable bond shall be

=return*(1-tax rate)

=8.2*(1-0.21)

=6.478%

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