An Investor Purchases One Municipal and One Corporate Bond That

Multiple Choice

An investor purchases one municipal and one corporate bond that pay rates of return of 8% and 10%, respectively. If the investor is in the 22% marginal tax bracket, his or her after-tax rates of return on the municipal and corporate bonds would be ________ and ______, respectively.

A) 8%; 10%
B) 8%; 7.8%
C) 6.4%; 8%
D) 6.4%; 10%
E) 10%; 10%