Suppose that, holding yield constant, investors are indifferent as to whether they hold bonds issued by the federal

government or bonds issued by state and local governments $($that is$,$ they consider the bonds the same with respect to

default risk, information costs, and liquidity$).$ Suppose that state governments have issued perpetuities $($or consoles$)$ with

$$76$ coupons and that the federal government has also issued perpetuities with $$76$ coupons. If the state and federal

perpetuities both have after$-$tax yields of $6\%,$ what are their pre$-$tax yields? $($Assume that the relevant federal income tax

rate is $33\mathrm{.}92\%.)$

The pre$-$tax yield on the state perpetuity will be $,\%.($Round your response to two decimal places.$)$