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You are evaluating two different bonds: i) Municipal Bond where interest is exempt from federal income tax, and 2) Corporate Bond which is fully taxable.

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You are evaluating two different bonds: i) Municipal Bond where interest is exempt from federal income tax, and 2) Corporate Bond which is fully taxable. The municipal bond is providing a return of Rmuni= 6.5%. The corporate bond is providing a return of Rcorp=9.5%. a) Which bond would you select if your tax rate is t=15% ? b) Which bond would you select if your tax rate is t=35% ? c) What is the break-even tax rate that would make the net return from both bonds the same

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