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Question: Bond Investment Recommendation

Suppose that you are a financial advisor to two individuals who are considering investing in either a taxable Corporate Bond with an interest rate of 6.60%, or a tax-exempt Municipal Bond with a rate of 4.75%. Assume that both bonds have the same default risk and that, given their respective levels of income, Investor XY is subject to a marginal income tax rate of 35%, while investor WZ pays a marginal income tax rate of 20%. Which bond would you recommend to each of these two investors? Why?

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