Suppose corporate bonds with a AAA rating are currently yielding $3\%.$

a$.$ If your marginal tax rate $($federal $+$ state $+$ local$)$ is $30\%,$ what is your after$-$tax return on the corporate bonds?

b$.$ If tax$-$exempt municipals with a AAA rating yield $1\mathrm{.}85\%,$ would you invest in corporate bonds or municipals?

c$.$ What is the tax rate of the investor who would be indifferent between the taxable corporate and the tax$-$exempt munis?

d$.$ Based on c$.$ where will the following invest:

a$.$ Elon Musk $($federal $+$ state $+$ local tax rate $=42\%)$

b$.$ Penn State University $($tax exempt$)$

c$.$ Professor Strunk $($professor at Cornell: federal $+$ state $+$ local tax rate $=20\%)$