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Karl would like to invest in bonds and is considering either a taxable corporate bond with an interest rate of 8% or a tax-exempt municipal

Karl would like to invest in bonds and is considering either a taxable corporate bond with an interest rate of 8% or a tax-exempt municipal bond of comparable risk and credi quality with an interest rate of 5%. Karls marginal tax rate is 35%. After computing the equivalent after-rate for the taxable bond, you should recommend the corporate bond.

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