Question: An investor lives in a state with a 3 tax
An investor lives in a state with a 3% tax rate. Her federal income tax bracket is 35%. She wants to invest in 1 of 2 bonds that are similar in terms of risk (and both bonds currently sell at par value). The first bond is fully taxable and offers a yield of 10%. The second bond is exempt from both state and federal taxes and offers a yield of 7%. In which bond should she invest?
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