Government economists have forecasted one-year T-bill rates for the following five years as follows: You have liquidity premium 0.25% for the next two years and 0.50% thereafter. Would you be willing to purchase a 4-year T-bond at a 5.75% interest rate? Consider the decision to purchase either a 5-year corporate bond or a 5-year municipal bond. The corporate bond is a 12% annual coupon bond with a par value of $1,000. It is currently yielding 11.5%. The municipal bond has an 8.5% annual coupon and a par value of $1,000. It is currently yielding 7%. Which of the two bonds would be more beneficial to you? Assume that your marginal tax rate is 35%. Last modified: Sunday, January 26, 2014, 8:53 PM