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2. An investor is in the 28 percent income tax bracket and can earn 3.3 percent on a nontaxable bond. What is the comparable yield
2. An investor is in the 28 percent income tax bracket and can earn 3.3 percent on a nontaxable bond. What is the comparable yield on a taxable bond? If this same investor can eam 5.9 percent on a taxable bond, what must be the yield on a nontaxable bond so that the after-tax yields are equal? 3. An investor in the 35 percent tax bracket may purchase a corporate bond that is rated A and yields 6.0 percent. The investor may also buy an A-rated municipal bond with a 3.9 percent yield. Why may the corporate bond be preferred? (Assume that the terms of the bonds are the same.|
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