An investor in a $25\%$ marginal tax bracket, earning $$10$ in interest annually for a $$100$ U$.$S$.$ Treasury bond:

Earns a $10\%$ after$-$tax return because interest on U$.$S$.$ Treasury bonds is tax exempt at the federal level

Earns a $2\mathrm{.}5\%$ return after$-$tax

Would be indifferent between this bond and a municipal bond offering $$7\mathrm{.}5$ annually per $$100$ of face value, assuming the same default risk Earns a $6\%$ return after$-$tax