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John stone, an individual investor, is considering the purchase of one of the following bonds: (a) a 7 percent annual coupon municipal bond and (b)
John stone, an individual investor, is considering the purchase of one of the following bonds: (a) a 7 percent annual coupon municipal bond and (b) a 12 percent annual coupon corporate bond. Mr. Stone is in the 25 percent tax bracket. If both bonds are selling at par, have similar maturities, and are equally risky, which bond should he purchase?
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