Assume an investor is in the 31% marginal tax bracket. She is considering the purchase of either a 7.5% corporate bond that is selling at par or a 5.25% tax-exempt municipal bond that is also selling at par. Given that the two bonds are comparable in all respects except their tax status, the investor should buy the:

A.Corporate bond,because it has the higher yield of 7.50%.

B.Municipal bond,because its taxable-equivalent yield is 7.61%.

C.Corporate bond,because its after-tax yield is higher.