We discussed the differential tax rates among areas and taxpayers with respect to the implicit and explicit tax rates. You are requested to select a taxable bond fund and compare it to two or three municipal bond funds that are state specific. Hence, there are three $($or four$)$ funds in total that are analyzed by you $($one corporate bond fund, two municipal bond funds$).$ The objective here is to see if a person can arbitrage a profit by selectively investing in another state$$s municipal fund. One muni fund may be your state of residence $($Pennsylvania$)$ and the other might be a state with a zero$-$income tax rate. You might include a fourth state with a state income tax rate that is significantly higher than your state of residence$$s state income tax rate.

For a given point in time, you are expected to determine if$,$ and if so$,$ to what extent, a wealth advantage exists for our base taxpayer. This is not an easy task since you need to consider several variables. For example, there are different

$$ Federal income tax brackets $($you might select the highest rate and your own marginal tax rate$),$

$$ State income tax brackets $($dependent on the states chosen by you $($note$,$ you can only choose one state with no state income tax $($i$.$e$.,$ a zero$-$tax rate$))),$

$$ Risk of bond fund $($should be nearly equal or adjusted to approximate equality$),$

$$ Standard deduction $($although itemization would be a reasonable assumption for a small population of our country, you can ignore this issue unless you want to analyze it and simply assume you elect the standard deduction$).$

Please consider and elaborate on the above variables. Please be sure to document your sources used for this assignment, it is a requirement. Thank you!