Assume a corporate bond has the yield to maturity (YTM) of 7.2% and is taxable. Further assume that there is also a public bond that has the yield of maturity (YTM) of 5.8%. What is the marginal tax rate here?

A.) 17.54%

B.) 48.64%

C.) 19.44%

D.) 80.56%

If the current tax rate for corporate bonds is 22.4%, which of the following is true?

A.) The investor will prefer government bonds since it is free of taxation.

B.) The investor will prefer government bonds since the after-tax payoff will be higher.

C.) The investor will prefer corporate bonds since it is free of taxation.

D.) The investor will prefer corporate bonds because the after-tax payoff will be higher.