QUESTIONS 97 THROUGH 108 RELATE TO FIXED INCOME INVESTMENTS.
99. Investor A’s marginal tax rate is 45%, while Investor B’s is 30%. Both investors are considering
two bonds for inclusion in a taxable portfolio. One bond is tax-exempt with a yield of 4.50%, while
the other is taxable with a yield of 6.30%. Which bond will each investor most likely choose?
A.
Both investors will choose the taxable bond.
B.
Both investors will choose the tax-exempt bond.
C.
Investor A will choose the tax-exempt bond and Investor B will choose the taxable bond.