Use the following data for questions 1 and 2 suppose a, Ask an Expert

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Use the following data for questions 1 and 2. Suppose a municipal bond has a yield of 4%, while comparable taxable bonds pay 5%.

1. Which bond gives you the higher after-tax yield if your tax bracket is 30%?

(a) Municipal bond (b) Corporate bond

2. At what tax rate would you be indifferent between the two bonds?

(a) 25% (b) 10% (c) 30% (d) None of the above

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