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Suppose you're evaluating three alternative MMMF investments. The first fund buys a diversified portfolio of municipal securities from across the country and yields 3 percent.
Suppose you're evaluating three alternative MMMF investments. The first fund buys a diversified portfolio of municipal securities from
across the country and yields percent. The second fund buys only taxable, shortterm commercial paper and yields percent. The
third fund specializes in the municipal debt from the state of New Jersey and yields percent. You are a New Jersey resident, your
federal tax bracket is percent, and your state tax bracket is percent. Assume your state taxes do not affect your federal taxable
income.
a Calculate the aftertax yield for each of the alternatives.
Note: Do not round intermediate calculations. Enter your answers as a percent rounded to decimal places.
Answer is not complete.
b Which of these three MMMFs offers you the highest aftertax yield?
Municipal Fund
New Jersey Fund
Taxable Fund
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