SHOW ALL WORK TO GET RATING

Question 2 (25 points): The yield on a corporate bond issued by Capital One is 5%. The yield on a municipal bond issued by New York City is 4%. The total margin tax rate for New York State resident is 30%. (i) Which investment has a higher return, the corporate bond or the municipal bond (meaning calculating the municipal bond return and the after-tax corporate bond return)? [15 points] (ii) What is the cutoff tax bracket? [10 points]