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Question
Suppose you are an investor facing a choice between three investments that are identical in every way except in terms of their rates of return and taxability. Which investment provides the highest after-tax return?Investment A: interest rate 10 percent, tax rate 40 percent of interest income.
Investment B: interest rate 8 percent, tax rate 25 percent of interest income.
Investment C: interest rate 5 percent, tax rate 0 percent.
Investment D: interest rate 5 percent, tax rate 1 percent.
a. Investment A
b. Investment B
c. Investment C
d. Investment D
Answer
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