An Investor in a 28% Tax Bracket Is Trying to Decide

Multiple Choice

An investor in a 28% tax bracket is trying to decide whether to invest in a municipal bond or a corporate bond. She looks up municipal bond yields (rm) but wishes to calculate the taxable equivalent yield r. The formula she should use is given by ________.

A) r = rm × (1 - 28%)
B) r = rm / (1 - 72%)
C) r = rm × (1 - 72%)
D) r = rm / (1 - 28%)