What is the break-even tax rate between a taxable corporate bond yielding 7 percent and a...

Question

Question

What is the break-even tax rate between a taxable corporate bond yielding 7 percent and a comparable nontaxable municipal bond yielding 5 percent is?

*Please show all work..*

business finance

Answer 1

Answer #1

corporate bond yield*(1-tax rate)=municipal bond yield

7*(1-tax rate)=5

1-tax rate=(5/7)

tax rate=1-(5/7)

=28.57%(Approx).

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Answer 2

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