Maria lopez is a wealthy investor who's looking for a tax shelter. Maria is in the maximum (35%) federal tax bracket and lives in a state with a very high state income tax. (she pays the maximum of 11.5% in state income tax.) maria is currently looking at two municipal bonds, both of which are selling at par. one is a double-A-rated in-state bond that carries a coupon of 6 3/8%. The other double-A-rated out-of-state bond that carries a 7 1/8% coupon. her broker has informed her that comparable fully taxable corporate bonds are currently available with yields of 9 3/4%. alternatively, long treasuries are not available at yields of 9%. She has $100,000 to invest, and because all the bonds are high-quality issues, she wants to select the one that will give her maximum after-tax returns.

a. which one of the four bonds should she buy?

b. rank the four bonds (from best to worst) in terms of their taxable equivalent yields