Question

Short Term municipal bonds currently offer yields of 4%, while taxable bonds pay 5%. Which gives you the higher after tax yield if your tax bracket is.
a. zero
b. 10%
c. 20%
d. 30%

Answer 1

a. taxable pays more after taxes (5%)
b. taxable pays more after taxes (4.5%)
c. they pay the same after taxes (4%)
d. municipal pays more after taxes in the 30% bracket

Answer 2

Thanks, I came up with the same answers except for c. I came up with 4% for the taxable and 5% for the municipal, can you show me the equation so I can see what I am doing wrong.