Mrs.Jax plans to pay $100,000 for one of three investment alternatives that have the same risk.The income from investment 1 would be taxed at Mrs.Jax's 30% regular tax rate,the income from investment 2 would be taxed at a 20% preferential rate,and the income from investment 3 is tax-exempt.The investments offer the following before-tax yields. Investment 1: 8.25%
Investment 2: 7.5%
Investment 3: 6.0%
Which investment should Mrs.Jax select?
A) Investment 1
B) Investment 2
C) Investment 3
D) Mrs.Jax is neutral between investment 2 and investment 3.
Correct Answer:
Verified
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