An investor lives in a state with a 5% tax rate. Her federal income tax bracket is

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An investor lives in a state with a 5% tax rate. Her federal income tax bracket is 28%. She wants to invest in one of two 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 8%. The second bond is exempt from both state and federal taxes and offers a yield of 5%. In which bond should she invest?

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Fundamentals Of Investing

ISBN: 9780135175217

14th Edition

Authors: Scott B. Smart, Lawrence J. Gitman, Michael D. Joehnk

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