Question

You pay federal income taxes at a 28 percent marginal tax rate. You have the choice of buying either a taxable corporate bond paying 7.10 percent coupon interest or a similar maturity and risk municipal bond paying 5.90 percent coupon interest.
a. Which bond offers the higher after tax yield?
b. If you also pay a state income tax on taxable coupon interest at a 9 percent rate, but no tax on municipal interest, which bond offers the higher after tax yield?


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  • CreatedNovember 03, 2015
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