Would you prefer a fully taxable investment earning 13.8 percent or a tax-exempt investment earning 10 percent? assume a marginal tax rate of 28 percent.

To compare the two investments, we need to consider the after-tax return on each investment.

For the fully taxable investment earning 13.8 percent:
Step 1: Calculate the taxable return: 13.8% - (13.8% * 28%) = 9.936%
Step 2: Calculate the after-tax return: 9.936% * (1 - 0.28) = 7.1488%

For the tax-exempt investment earning 10 percent:
Step 1: Calculate the after-tax return: 10% * (1 - 0.28) = 7.2%

Comparing the after-tax returns, the tax-exempt investment earning 10% has a higher after-tax return (7.2%) compared to the fully taxable investment earning 13.8% with an after-tax return of 7.1488%.

Therefore, based on these calculations, the tax-exempt investment with a 10% return is more favorable given a marginal tax rate of 28%.

To determine which investment option is more beneficial for you, we need to calculate the after-tax return for both scenarios.

For the fully taxable investment earning 13.8 percent, the after-tax return can be calculated using the following steps:

Step 1: Determine the taxable return
Multiply the investment return (13.8 percent) by (1 - marginal tax rate):
13.8% x (1 - 0.28) = 9.936%

Therefore, the fully taxable investment would have an after-tax return of 9.936 percent.

For the tax-exempt investment earning 10 percent, the after-tax return is the same as the stated return since it is tax-exempt.

Step 2: Compare the after-tax returns
Compare the after-tax returns of both investments:
Fully taxable investment (9.936%) vs. Tax-exempt investment (10%)

In this case, the tax-exempt investment earning 10 percent has a higher after-tax return than the fully taxable investment with an after-tax return of 9.936 percent.

Therefore, given a marginal tax rate of 28 percent, the tax-exempt investment earning 10 percent would be the preferable option.