Question
Todd has the opportunity to buy a municipal bond with a coupon of 4.0% or a corporate bond with a coupon of 6.0%. His marginal
Todd has the opportunity to buy a municipal bond with a coupon of 4.0% or a corporate bond with a coupon of 6.0%. His marginal tax bracket is 35% and his average tax rate is 23%. What would you recommend? (Select the best response)
| A. | Buy the municipal bond because its fully taxable equivalent yield is 6.15% | |
| B. | Buy the corporate bond because its fully taxable equivalent yield is 9.23% | |
| C. | Buy the corporate bond because the fully taxable equivalent yield of the municipal bond is 5.19%, which is less than the 6.0% on the corporate bond | |
| D. | Buy the corporate bond because it has the higher coupon rate |
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Entrepreneurial Finance And Accounting For High-Tech Companies
Authors: Frank J Fabozzi
1st Edition
0262336901, 9780262336901
