Steven has $100,000 to purchase a bond. Two bonds of similar credit risk are available. The first
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Question:
Steven has $100,000 to purchase a bond. Two bonds of similar credit risk are available. The first is taxable with an eight percent yield; the second is tax exempt with a five percent yield. Steven is in the 39.6 percent federal income tax bracket and the 3.23 percent state income tax bracket. Which bond should Steven purchase? How much higher is his return in the first year for this bond versus the other?
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