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An investor is in a 35% combined federal plus state tax bracket. If corporate bonds offer 9.25% yie

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Business

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Problem 2-15
An investor is in a 35% combined federal plus state tax bracket.
If corporate bonds offer 9.25% yields, what must municipals offer for the
investor to prefer them to corporate bonds? (Round your answer to 2
decimal places.)
Minimum municipals offer
%
Explanation:
The after-tax yield on the corporate bonds is: 0.0925 × (1 – 0.35) = 0.0601 or 6.01%.
Therefore, the municipals must offer at least 6.01% yields.
6.01 ± 1%

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