Tonya, who lives in California, inherited a $100,000 State of California bond in 2015. Her marginal Federal tax rate is 35%, and her marginal state tax rate is 5%. The California bond pays 3.3% interest, which is not subject to California income tax. She can purchase a corporate bond of comparable risk that will yield 5.2% or a U.S. government bond that pays 4.6% interest. Which investment will provide the greatest after-tax yield?

(Hoffman, 20150414, p. 5-39)

Hoffman, W. H. (20150414). South-Western Federal Taxation 2016: Individual Income Taxes, 39th Edition [VitalSource Bookshelf version]. Retrieved from https://bookshelf.vitalsource.com/books/9781305893573

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