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