Daniel Plans to Invest $20,000 in Either a Corporate Bond

question 120

Multiple Choice

Daniel plans to invest $20,000 in either a corporate bond paying 5% or a tax-exempt bond with a 4% interest rate.The bonds have an equivalent level of risk.Daniel has a 33% marginal tax rate and wants to maximize his after-tax earnings.Daniel should

• A)invest in the corporate bond due to its higher stated interest rate.
• B)invest in the tax-exempt bond since its yield is more than the after-tax return on the corporate bond.
• C)invest in the corporate bond because its after-tax earnings are more than the return on the tax-exempt bond.
• D)allocate his money equally between the two investments.

---

Definitions:

Include

A directive used in many programming languages to incorporate the contents of a file or library into a program.

Preprocessor Statement

A directive in programming languages like C that provides instructions to the compiler to process information before actual compilation starts.

Math.h

A header file in the C programming language that provides mathematical functions and constants.