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A municipal bond yields 6.75%. A corporate bond on comparable credit quality and maturity yields 9.0%. At what marginal tax rate would an investor be

A municipal bond yields 6.75%.

A corporate bond on comparable credit quality and maturity yields 9.0%.

At what marginal tax rate would an investor be indifferent between the two bonds?

Based on your answer, explain why investors in the highest tax-bracket are more inclined to invest in municipal bonds than investors in lowest tax-bracket.

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