You are debating between adding two bonds to your portfolio. The first bond, is an Apple bond with ten years to maturity, a price of $500, zero coupon payments, and a face value of $1,000. The second bond is a tax-exempt bond issued by the state of Missouri with a yield to maturity of 4%. The before-tax yield to maturity of the first bond is _______. If your tax rate is 40%, the after-tax yield of the first bond is __________ and you should prefer buying ______.

10.78%; 4.31%; bond 2

7.18%; 4.31%; bond 1

7.18%; 2.87%; bond 2

6.35%; 3.81%; bond 2