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There are no asset prices given 7. Suppose that you are a saver with a choice of three financial assets that are identical in every
There are no asset prices given
7. Suppose that you are a saver with a choice of three financial assets that are identical in every way except their nominal interest rate and taxability. Calculate the after tax real yield for each of the following three assets and choose which of the three assets is the best option if inflation is expected to be 1.75% annually with a federal income tax rate of26%. Asset 1 : A corporate bond with an interest rate 7.5% in a state with an income tax rate of 4.5%. Asset 2: A Treasury bond with an interest rate 6.25% in a state income tax rate of 0%. Asset 3: A municipal bond with an interest rate 5.0% in a state with an income tax rate of 5.5%
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