Homework Answers
The investor is better of at any rate above 30%, i.e 31% of tax rate would give the investor 5.00% return (7.25 - (7.25*31%)).
Thus the return from the tax exempt municipal bond would be higher than the return from the taxable corporate bond.
The after tax rate for the Corporate Bond when the tax rate is 10% is 6.53% (7.25 - (7.25*10%))
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