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Assume that a taxable bond has a yield to maturity of 4.55%, while a non-taxable bond has a yield of 3.5%. The taxable bond is
- Assume that a taxable bond has a yield to maturity of 4.55%, while a non-taxable bond has a yield of 3.5%. The taxable bond is the more liquid of the two bonds. An investors marginal tax rate is 25%.
Which security will offer the investor the higher after-tax yield?
At what marginal tax rate will the two securities have the same after-tax yield?
Which bond should the individual select as an investment? Why?
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