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Question 18 (2 points) Interest income is taxable in Canada according to the personal marginal tax rate. To help the municipal government to raise money,

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Question 18 (2 points) Interest income is taxable in Canada according to the personal marginal tax rate. To help the municipal government to raise money, tax-exempt bonds are issued to attract investors. Basically, investors purchasing tax-exempt bonds don't need to pay tax on their interest income. An investor is now choosing between two bonds. Bond A is tax-free with a yield to maturity rate of 4%. Bond B is a normal bond. Her limit in her Tax-Free Savings Account (TFSA) account is $20,000 and her maginal tax rate is 52%. After thorough consideration, she decided to invest $30,000 in bond A and $20,000 in bond B. Given this allocation decision, what is the most likely YTM for bond B? Hint: The interest income in a TFSA is not taxed. The answer is 8.83%. The answer is 3.90%. The answer is 9.33%. The answer is 7.83%. Question 18 (2 points) Interest income is taxable in Canada according to the personal marginal tax rate. To help the municipal government to raise money, tax-exempt bonds are issued to attract investors. Basically, investors purchasing tax-exempt bonds don't need to pay tax on their interest income. An investor is now choosing between two bonds. Bond A is tax-free with a yield to maturity rate of 4%. Bond B is a normal bond. Her limit in her Tax-Free Savings Account (TFSA) account is $20,000 and her maginal tax rate is 52%. After thorough consideration, she decided to invest $30,000 in bond A and $20,000 in bond B. Given this allocation decision, what is the most likely YTM for bond B? Hint: The interest income in a TFSA is not taxed. The answer is 8.83%. The answer is 3.90%. The answer is 9.33%. The answer is 7.83%

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