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10-11) An investor is in the 25% Federal tax bracket. She is considering a 4% municipal bond (Federal tax-free) versus an 542% corporate bond (fully-taxable).

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10-11) An investor is in the 25% Federal tax bracket. She is considering a 4% municipal bond (Federal tax-free) versus an 542% corporate bond (fully-taxable). Calculate the taxable equivalent yield for the municipal bond. Assuming both are high-quality bonds, which should she buy if she wants the highest-yielding bond? (2 points)

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