Harry Swartz wants to invest in a bond and has narrowed his choices down to two issues. The first is offered by Microsoft Corp. and pays an interest rate of 8%. The second option is offered by the city of Springfield, Massachusetts, and offers a return of 6%. Harry feels that the risk levels inherent in the two bonds are similar. The both mature in ten years. Harry is single, has taxable income of $125,000 in 2012 and lives in a state that has no personal income tax. Which bond should Harry choose?
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