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An individual who is in the 33 1/3 percent income tax bracket can buy either...

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Accounting

An individual who is in the 33 1/3 percent income tax bracket can buy either a municipal bond yielding 7 percent or a corporate bond yielding 12 percent. Risk is the same for both. In this case, the individual should:

a) Purchase the municipal bond because its yield is not subject to income taxation.

b) Purchase the corporate bond because a 12 percent yield is greater than 5 percent.

c) Purchase the corporate bond because its after tax yield is greater than the tax yield on the municipal bond.

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