Assuming the securities have equal default risk

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Reference no: EM131085675

Reggie White, a corporate treasure, is trying to decide which of two 1-year securities to purchase: a negotiable CD with a 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 stale as Reggie's company, but he recognizes that the muni's interest is exempt from federal income 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: EM131085675

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