Your financial planner has just completed an analysis of your fixed-income holdi

Question

Your financial planner has just completed an analysis of your fixed-income holdings. She has determined each of your after-tax yield, but is cautioning you that the tax implications of your holding could change if Congress changes marginal tax rates. Based on the following after-tax yields, which of these bounds would offer the greatest after-tax return if your federal marinal tax bracket increased from 25% to 30%, while your state marginal bracket remained at 4.5%?

* A corporate bond with a 5.1% after-tax return

* An out-of-state municipal bond with a 4.8% after-tax return

* An in-state municipal bond with a 4.8% after-tax return

Explanation / Answer

ANSWER:

A corporate bond with a 5.1% after-tax return will always has a greatest after-tax return. Because the return of after-tax retun is at 5.1% when compared to out-of-state municipal bond and in-state-municipal bond which is at 4.8%.

Because of the following aspects,

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