Emily is in the 35% marginal tax bracket.She can purchase a York County school bond yielding 3.5%
Interest and the interest is not subject to a 5% state tax.But she is interested in earning a higher return
For comparable risk.Which of the following is correct:
A) If she buys a corporate bond that pays 6% interest, her after-tax rate of return will be less than ifshe purchased the York County school bond.
B) If she buys a U.S. government bond paying 5%, her after-tax rate of return will be less than ifshe purchased the York County school bond.
C) If she buys a common stock paying a 4% dividend, her after-tax rate of return will be higherthan if she purchased the York County school bond.
D) All of these are correct.
E) None of these are correct.
Correct Answer:
Verified
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