Your bank has two checking account options, one pays tax-free interest at a rate of 2% per annum and the other pays taxable interest at a rate of 3% per annum. You are currently in a 35% marginal tax bracket.

If you converted the tax-free interest rate to the comparable taxable interest rate you would find that:

The comparable taxable rate is 3.53%, thus you would select the tax free account

The comparable taxable rate is 3.08%, thus you would select the tax freeaccount

The comparable taxable rate is 2.667%, thus you would select the taxable account

You would always select the account bearing the highest interest rate