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An investor is considering buying either a corporate bond or a municipal bond. The corporate bond is a 10 year 5% coupon bond yielding 5%.
An investor is considering buying either a corporate bond or a municipal bond. The corporate bond is a 10 year 5% coupon bond yielding 5%. The municipal bond is a 10 year 4% coupon bond with a yield of 4%. If the investor is in the 25% tax bracket, which bond should the investor purchase? Why? (Show your work.)
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