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Which security should the treasurer select

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A corporate treasurer is trying to decide which of two securities to purchase: A municipal CD pay 4.5% interest rate and a bank CD pay 6.25% interest rate. The issues municipality of the municipal CD is in the same state as the company. Suppose the federal tax rate is 25% and the state tax rate is 5%. Which security should the treasurer select, assuming the securities have equal default risks?

Reference no: EM132731644

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