An investor is comparing the following two bonds: a bond from ABC Corp which p

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    An investor is comparing the following two bonds: a bond from ABC Corp which pays an interest rate of 9 percent per year and a municipal bond which pays an
    interest rate of 7.9 percent per year. The investor is in the 15 percent tax bracket. Which bond will give the investor a higher after tax interest rate and
    for which reason?

    a) the ABC bond because it pays a 9 % interest rate while the municipal pays 7.9%.

    b)the ABC bond because it pays an equivalelnt after tax rate of 10.6% while the municipal bond pays out an equivalent after tax rate of 9.3%.

    c)the municipal bond because it pays an equivalent after tax rate of 9.3 percent while the ABC bond pays out a 9 percent interest rate.

    d) the municpal bond because it pays an equivalent after tax rate of 7.9% while the ABC bond pays out an equivalent after tax rate of 7.65%.

    e) none of the above is correct

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