A municipal bond carries a coupon rate of 7 and is trading

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Question 1: A municipal bond carries a coupon rate of 7% and is trading at par. What would be the equivalent taxable yield of this bond to a taxpayer in a 40% tax bracket?

Question 2: A municipal bond carries a coupon rate of 7% and is trading at par. A corporate bond pays a rate of 10%. At what marginal tax rate would an investor be indifferent between these two bonds?

Reference no: EM13477748

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