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A bond issued by IBM pays 8%. A bond issued by the municipality of College Park, MD pays 6.5%. Assume that your highest marginal tax
A bond issued by IBM pays 8%. A bond issued by the municipality of College Park, MD pays 6.5%. Assume that your highest marginal tax rate is 25%. Which of the following is true? (REMEMBER: the interest income from municipal bonds is tax free).
a. | The net rate of return for the IBM bond is higher. |
b. | The net rate of return for the College Park bond is higher. |
c. | None of these, there is not enough information to compute the net rates of return. |
d. | The net rate of return for both bonds are the same. |
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