Question
Suppose a municipal bond offers a yield to maturity of 5% and a same maturity corporate bond offers a 4% yield. For which values of
Suppose a municipal bond offers a yield to maturity of 5% and a same maturity corporate bond offers a 4% yield. For which values of the marginal tax rate an investor would prefer to buy the corporate bond? A. The investor would prefer to buy the corporate bond if she faces a marginal tax rate greater than 40%. B. The investor would prefer to buy the corporate bond if she faces a marginal tax rate lower than 20%. C. The investor would prefer to buy the corporate bond if she faces a marginal tax rate greater than 20%. D. The investor would prefer to buy the corporate bond if she faces a marginal tax rate lower than 40%.
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