An investor who is in a 35% federal tax bracket and a 5% state bracket buys a 6.5% yield corporate bond. What is his after-tax yield? (Assume that federal taxes are not deductible against state taxes and vice versa) .

A) 3.9%
B) 4.75%
C) 6.5%
D) 9.9%

Federal Tax Bracket

Federal tax brackets are ranges of income to which different tax rates apply, forming part of the U.S. progressive tax system.

After-tax Yield

The return on an investment after the effects of income taxes are taken into account, reflecting the actual gain to the investor.

Corporate Bond

A debt security issued by a corporation to raise funding, which promises to pay back with interest.