Solve for the taxable equivalent yields given the following yields on municipal bonds and marginal tax rates.
Question:
a. For an investor in the 28 percent tax bracket, what is the approximate point of indifference between a corporate bond yield and a municipal bond yielding 5.75 percent (ignore state taxes).
b. For an investor in the 35 percent tax bracket, what must she earn on a municipal bond to be equivalent to a corporate bond yielding 10 percent?
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