5. A portfolio manager is examining two possible investment alternatives for the short-term investment portfolio. Investment A is a taxable money market security with a yield of 3.2 percent. Investment B is a nontaxable security with a yield of 2.5 percent. The firms marginal tax rate is 35 percent.

a. With these base assumptions, which security should be purchased?

b. At what marginal tax rate would the portfolio manager be indifferent between the securities?