You currently own a corporate bond issued by Goldman Sachs that yields 8.0%. What would a...
You currently own a corporate bond issued by Goldman Sachs that yields 8.0%. What would a tax-exempt bond with similar risk have to yield for you to be indifferent between municipal bond and the Goldman bond if your marginal tax rate is 25%?
Homework Answers
Yield on tax-exemption bond:
= 8%*(1-25%)
= 6%
Hence, yield on municipal bond is 6.0%
Add Answer to:
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