Assume corporate bond is paying annual coupon

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Assume a corporate bond is paying an annual coupon of 7%. A municipality bond with the same level of risk and the same time to maturity is paying 5% annual coupon. Your tax rate is 30%, which bond would you prefer to invest in? What would be the coupon rate (on the corporate bond) that would make you indifferent between the two ?

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Reference no: EM132053271

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