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Consider the decision to purchase either a seven year corporate bond or a seven year municipal bond. The corporate bond is a 6% annual coupon
Consider the decision to purchase either a seven year corporate bond or a seven year municipal bond. The corporate bond is a 6% annual coupon bond with a par value of $1,000 and a yield of 5%. The municipal bond has an annual coupon of 4%, par value of $1000 and a yield of 3.5%. Which of the two bonds would be more beneficial to you assuming you have a 35% tax rate? Do not use Excel. Financial calculator is permitted, show how you enter calculations (e.g. for After Tax YTM).
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