Ted Is Considering a State of Nebraska Bond That Pays

Ted is considering a State of Nebraska bond that pays 3.40% and a comparable risk bond issued by Verizon that pays 5.25%. Ted is in the 37% marginal tax bracket. Relative to the Verizon bond, Ted should conclude that the taxable equivalent yield (TEY) on the Nebraska bond is approximately:

A) 9 basis points higher.
B) 15 basis points higher.
C) 9 basis points lower.
D) 15 basis points lower.