Suppose youre evaluating three alternative MMMF investments. The first fund buys a diversified portfolio of municipal securities from across the country and yields 4.2 percent. The second fund buys only taxable, short-term commercial paper and yields 5.8 percent. The third fund specializes in the municipal debt from the state of New Jersey and yields 3.9 percent. If you are a New Jersey resident, your federal tax bracket is 35 percent, and your state tax bracket is 8 percent.

Calculate the aftertax yield for each of the alternatives.

Municipal fund

Taxable fund

New Jersey Municipal fund

Which of these three MMMFs offers you the highest aftertax yield?