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Suppose a bank has found bank-qualified municipal bonds which have a nominal gross rate of return of 8 percent and that it can borrow funds

Suppose a bank has found bank-qualified municipal bonds which have a nominal gross rate of return of 8 percent and that it can borrow funds needed for this purchase at a rate of 6.25 percent. The bank is in the 35 percent tax bracket. What is the net after-tax return on this bond?

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3.5 percent (please explain in steps)

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