Assuming the securities have equal default risk

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Reference no: EM131014246

Reggie White, a corporate treasurer, is trying to decide which two 1-year securities to purchase: a negotiable CD with nominal yield of 6 percent or a municipal security with a nominal yield of 4.25 percent. The issuing municipality is not in the same state as Reggie’s company, but he recognizes the muni s interest is exempt from federal taxation. His company s marginal federal tax rate is 39 percent. Which security should the treasurer select, assuming the securities have equal default risk?

Reference no: EM131014246

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