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For an individual who pays personal income taxes at a rate of 30 percent, which of the following statements is most correct?

a. An investment in a tax-exempt (municipal) bond is always preferable to an investment in a taxable (corporate) bond.

b. An investment in a tax-exempt (municipal) bond is never preferable to an investment in a taxable (corporate) bond.

c. An investment in a tax-exempt (municipal) bond with an interest rate of 8 percent is preferable to an investment in a taxable (corporate) bond with an interest rate of 10 percent.

d. An investment in a tax-exempt (municipal) bond with an interest rate of 5 percent is preferable to an investment in a taxable (corporate) bond with an interest rate of 10 percent.

e. The individual will always be indifferent between an investment in a tax-exempt (municipal) bond and an investment in a taxable (corporate) bond.

Financial Management, Finance

  • Category:- Financial Management
  • Reference No.:- M92394719

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