The following investments all bear the same after tax risk premium, rrp. Calculate the risk adjusted pretax rates of return, Rra, for assets II, III, and IV, as well as the expected pretax total return (unadjusted for risk, Ro) for assets III and IV. Explain your answer, and give examples of each of these assets observed in the marketplace.

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Tax Treatment Risk-Adjusted of Risk Risk-Adjusted Expected Pretax Total Tax Treatment of Pretax Adjusted Return Fully taxable Tax-exempt Tax-exempt Fully taxable After-Tax Asset Return R Risk Premium Return R Return 2096 12% Fully Taxable Tax-exempt Taxed at Taxed at t = 25% 1096 6% 6% 696 6% 25%