Kevin Has the Option of Investing in a Municipal Bond

Kevin has the option of investing in a municipal bond that provides a 4.5 percent return or a taxable bond that provides a 7 percent return. Assuming Kevin's marginal tax rate is 35 percent, what investment should he choose and why?

A) Taxable bond; provides a 4.55 percent return versus 4.5 percent return for the municipal bond
B) Taxable bond; provides a 7 percent return versus 4.5 percent return for the municipal bond
C) Taxable bond; provides a 4.55 percent return versus 2.9 percent return for the municipal bond
D) Municipal bond; provides a 4.5 percent return versus 4.2 percent return for the taxable bond
E) None of these