Muddy Ruel is considering purchasing one of two bonds a corporate bond with a 9 coupon interest rate, selling at par, or a tax free municipal bond with a 6 coupon interest rate, selling at par Given that Muddy is in the 30 tax bracket, and assuming that all other relevant factors are the same betwe...

For a bond with a 9 return and a 30 tax rate Muddys aftertax r ...

Muddy Ruel is considering purchasing one of two bonds: a corporate bond with a 9% coupon interest

Question:

Muddy Ruel is considering purchasing one of two bonds: a corporate bond with a 9% interest rate, selling at par, or a tax-free municipal bond with a 6% interest rate, selling at par. Given that Muddy is in the 30% tax bracket, and assuming that all other relevant factors are the same between the two bonds, which bond should Muddy select?
Coupon
A coupon or coupon payment is the annual interest rate paid on a bond, expressed as a percentage of the face value and paid from issue date until maturity. Coupons are usually referred to in terms of the coupon rate (the sum of coupons paid in a...