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Which bonds should Bhad Bhabie invest

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Question - Bhad Bhabie plans to invest $100,000 in either a corporate bond paying 3.5% or a tax-exempt bond with a 2.5% interest rate. The bonds have an equivalent level of risk. Bhad Bhabie has a 30% marginal tax rate and wants to maximize her after-tax earnings. Which bonds should Bhad Bhabie invest in assuming that she wants to maximize her after-tax return?

A. Bhad Bhabie should invest in the tax-exempt bond since its yield is more than the after-tax return on the corporate bond.

B. Bhad Bhabie should invest in the corporate bond due to its higher stated interest rate.

C. Bhad Bhabie should invest in the corporate bond because its after-tax earnings are more than the return on the tax-exempt bond.

D. Bhad Bhabie should be indifferent between the two investments.

E. Bhad Bhabie should invest in the high-yield offshore hedge futures trading Ponzi scheme recommended by her ex-boyfriend, Lance Uppercut.

Reference no: EM132686829

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