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Given the following information, which bond should a prudent investor choose? Justify your answer with mathematical proof. At what marginal tax rate will an investor

  1. Given the following information, which bond should a prudent investor choose? Justify your answer with mathematical proof.
  2. At what marginal tax rate will an investor be indifferent between holding either security? Why?

MUNI yield-to-maturity = 1.4%

Corporate yield-to-maturity = 2.2%

Marginal tax bracket = 35%

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