Question: Suppose that you observe two identical bonds except for the fact that one bond is taxable and the other one is tax-exempt. The taxable bond

Suppose that you observe two identical bonds except for the fact that one bond is taxable and the other one is tax-exempt. The taxable bond is currently priced at par. The tax-exempt bond is currently priced at $1,074.12. Both bonds have 5 years left to maturity, $1000 par value, and pay annual coupons of 6%. Calculate the tax rate that would make an investor indifferent between investing in these two bonds

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