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Which option will provide the greatest after-tax return

Reggie wants to invest $10,000. His options are:

A. Gibraltar Corporation bonds with an annual interest rate of 8%

B. State of Hawaii bonds with an annual interest rate of 5%

C. Series EE savings bonds, a $10,000 investment will pay $14,300 in 5 years.

Assume that Reggie is a 28% marginal tax rate payer, the time value of money is 6% and Reggie intends to hold any amounts invested for 5 years. Which option will provide the greatest after-tax return, ignoring state income tax implications? Would your answer change if Reggie's marginal tax rate is 33%?

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Accounting Basics: Which option will provide the greatest after-tax return

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