Question
You would like to invest your money in a bond. A bond for Restaurant Corp. has a yield-to-maturity of 5.2%. A municipal bond, exempt at
You would like to invest your money in a bond. A bond for Restaurant Corp. has a yield-to-maturity of 5.2%. A municipal bond, exempt at the federal level, has a yield to maturity of 4.19%. If your tax rate is 25%, which bond do you prefer based on their yields? A. The corporate bond as the comparable rate for the municipal bond is 6.92% B. The corporate bond as the comparable rate for the municipal bond is 5.47% A. The municipal bond as the comparable rate for the municipal bond is 6.92% B. The municipal bond as the comparable rate for the municipal bond is 5.47%
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