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Suppose you have the following two investment alternatives to consider: A bond issued by the Apple, Inc. with a yield to maturity (YTM) of 5%

Suppose you have the following two investment alternatives to consider: A bond issued by the Apple, Inc. with a yield to maturity (YTM) of 5% A bond issued by the City of Austin government with a yield to maturity of 4.5%

The two bonds are otherwise the same in terms of all other characteristics. All YTMs are in the pretax basis. If you face an income tax rate of 20%.

What are the aftertax rates of return on each investment?

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