How much must an out-of-state muni bond yield if you have a taxable bond paying 10%...

Question

Question

How much must an out-of-state muni bond yield if you have a taxable bond paying 10% while in the 28% marginal tax bracket?

business finance

Answer 1

Answer #1

The municipal bond must pay at least the after-tax return of the taxable bond to be worth purchasing:-

=10%*(1-28%)

=7.20%

Answer 2

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