Question $33(2\mathrm{.}5$ points$)$

A tax$-$exempt municipal bond and a corporate bond of equal risk, liquidity and

maturity, yield $6\%$ and $10\%$ respectively. For which values of marginal tax rates

would a bond investor prefer to buy the municipal bond?

A bond investor would prefer to buy the municipal bond if his$/$her marginal tax

rate is greater than $40\%.$

A bond investor would prefer to buy the municipal bond if his$/$her income tax

rate is less than $25\%.$

A bond investor would prefer to buy the municipal b$$ond if his$/$her income tax

rate is less than $35\%.$

A bond investor would prefer to buy the municipal bond if his$/$her marginal tax

rate is greater than $20\%.$