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Suppose Ms. White faces a marginal tax rate of 26%. Ms. White considers investing in one of the following two bonds: a corporate bond with
Suppose Ms. White faces a marginal tax rate of 26%. Ms. White 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 6.50% interest rate. Ceteris paribus, which bond should Ms. White choose? The municipal bond because the tax-free rate on the corporate bond is 5.55% The corporate bond because the rate on the corporate bond is 7.50% O The corporate bond because the tax-free rate on the corporate bond is 6.8% Either bond because the tax-free rate on the corporate bond is the same as the rate paid on the municipal bond
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