Answer:
5% and 4.55%
Explanation:
The computation is shown below:
Given that
Tax rate = 35%
High-quality municipal bond rate = 5%
High-quality corporate bond rate = 7%
So, by the above information
The Tax-exempt municipal bond is the same that is given in the question i.e 5%
And, the after-tax return on the corporate bond is
= Corporate bond interest rate × (1 - tax rate)
= 7% × (1 - 0.35)
= 7% × 0.65
= 4.55%
Moreover, there is no interest earned on a municipal bond after coming of the sixteenth amendment
