Winnie is deciding between investing $100,000 in a state government bond (muni bond) that pays 4% interest compounded annually or a corporate bond that pays 5% interest compounded annually. Winnie will be in the 24% marginal tax bracket in 2020 (assume the bond interest will not push her into a higher marginal tax bracket). What will Winnie’s 2020 after-tax return (in dollars) be if she invests in the state government bond on January 1, 2020 and holds the bond for all of 2020? 2. Same facts as previous question. What will Winnie’s 2020 after-tax return be (in dollars) if she invests in the corporate bond on January 1, 2020 and holds the bond for all of 2020? Only consider federal income tax (not state income taxes or any other taxes).

Answer rating: 100% (QA)

1 State Government Bond Income from bonds issued by the state ... View the full answer