I had a 50/50 chance of getting this question right and the answer is 12.2%, but I don't know how to draw that conclusion. The problem is: Would you prefer a fully taxable investment earning 12.2% or a tax exempt investment of 9.2%. Assuming a 24% tax rate.   Please help me understand.

CONCEPTS IN FED.TAX.,2020-W/ACCESS
20th Edition
ISBN:9780357110362
Author:Murphy
Publisher:Murphy
Chapter1: Federal Income Taxation—an Overview
Section: Chapter Questions
Problem 63P
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I had a 50/50 chance of getting this question right and the answer is 12.2%, but I don't know how to draw that conclusion. The problem is:

Would you prefer a fully taxable investment earning 12.2% or a tax exempt investment of 9.2%. Assuming a 24% tax rate.  

Please help me understand.

Expert Solution
Step 1

The tax exempt investment is a type of investment in which the tax will not be applied in case of interest payments or returns.

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