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Assume that Lavonia's marginal tax rate is 20%. If a city of Tampa bond pays 3.6% interest, what interest rate would a corporate bond have

Assume that Lavonia's marginal tax rate is 20%. If a city of Tampa bond pays 3.6% interest, what interest rate would a corporate bond have to offer for Lavonia to be indifferent between the two bonds?

Multiple Choice

  1. 20.00%
  2. 6.60%
  3. 5.60%
  4. 2.60%
  5. None of the choices are correct.

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