Question
A young couple has received a gift of $5,000, which they would like touse to buy shares in a mutual fund.They are in the 15%
A young couple has received a gift of $5,000, which they would like touse to buy shares in a mutual fund.They are in the 15% bracket for federal income tax, and they pay no state or local income taxes. Should they purchase shares in a tax-free municipal bond fund that pays 4% annual interest or in a high-quality corporate bond fund that pays 6% interest? Both funds are highly recommended, and both have had similar fluctuations in price; the only difference between themis that the interest from the municipal bond fund is tax deductible, whereas the higher interest from the corporate bond fund is not.
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