You have to decide between two bonds with four years left to maturity. The first is a corporate bond which has a 12% annual coupon with a par value of $1,000. It is currently yielding 11.39%. The municipal bond has an 8.5% annual coupon and a par value of $1,000. It is currently yielding 7%. Which of these two bonds would be more beneficial to you? Assume that your marginal tax rate is 35%. The municipal bond yielding 7% is a better choice Both bonds yield exactly 7%. So, either is fine. The corporate bond yielding 7.24% after-tax is a better choice. The corporate bond yielding 5.95% after-tax is a better choice.

You have to decide between two bonds with four years left to maturity. The first is a corporate bond which has a 12% annual coupon with a par value of $1,000. It is currently yielding 11.39%. The municipal bond has an 8.5% annual coupon and a par value of $1,000. It is currently yielding 7%. Which of these two bonds would be more beneficial to you? Assume that your marginal tax rate is 35%. The municipal bond yielding 7% is a better choice Both bonds yield exactly 7%. So, either is fine. The corporate bond yielding 7.24% after-tax is a better choice The corporate bond yielding 5.95% after-tax is a better choice