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Question 1: The Yield on a corporate bond is 10%, and it is currently selling at par. The marginal tax rate is 20%. A par value municipal bond with a coupon rate of 8.50% is available. Which security is a better buy?
Question 2: Suppose Microsoft, Inc., is trading at $27.29 per share. It pays an annual dividend of $0.32 per share, and analysts have set a one-year target price around $33.30 per share. What is the expected return of this stock?
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