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3) The break-even tax rate between a corporate bond and a comparable nontaxable municipal bond is 20%. If the municipal bond has a yield of

3) The break-even tax rate between a corporate bond and a comparable nontaxable municipal bond is 20%. If the municipal bond has a yield of 4.5%,

a) What is the yield of the corporate bond?

b) If the actual tax rate is 15%, which bond would you prefer buying?

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