James is considering investing in a taxable corporate bond or a tax-free municipal bond. The corporate bond he is considering is currently paying 5%, and the municipal bond is paying 3.5%. If James is in the 24% marginal tax bracket, which bond is the better investment? Hint: Find the taxable equivalent yield for the muni bond or the tax-free equivalent yield for the corporate bond, and compare the results with the rates of the bonds he is considering. The muni bond is best because the taxable equivalent yield to the muni bond is 46% The corporate bond is best because the tax-free equivalent yield for the corporate bond is 3.8% The muni bond is best because the taxable equivalent yield is 2.7% The corporate bond is better because the tax-free equivalent yield is 6.6% Previous