Hannah Has $20,000 Invested in Corporate Bonds with a Stated

Multiple Choice

Hannah has $20,000 invested in corporate bonds with a stated interest rate of 6 percent and $20,000 in tax-exempt municipal bonds issued for governmental activities with a stated interest rate of 5 percent. What is her annual after-tax cash flow from interest income for each investment if her marginal tax rate is 28%?

A) $1,000 from the municipal bonds and $1,200 from the corporate bonds
B) $1,000 from the municipal bonds and $864 from the corporate bonds
C) $720 from the municipal bonds and $1,200 from the corporate bonds
D) $720 from the municipal bonds and $864 from the corporate bonds