Suppose Ms. Green faces marginal tax rate of 26%. Ms. Green considers investing in one of the following two bonds: a corporate bond with 7.50% interest rate and the other is a tax free municipal bond with a 5.00% interest rate. Ceteris parties, which should Ms. Green choose?

3. Federal income tax exemption of municipal bonds Suppose Ms, Green faces a marginal tax rate of 26%. Ms. Green considers investing in one of the following two bonds: a corporate bond with a 7.50% interest rate, and the other is a tax-free municipal bond with a 5.009% Interest rate. Cetenis paribus, which band should Ms. Green choose? The municipal bond because the tax-free race on the corporate bond is 5.39% The municipal bond because it is a tax-free bond ed O Either bond because the tax-free rate on the corporate bond is the same as the rate paid on the municipal bond The corporate bond because the tax-free rate on the corporate bond is 5.55%