How high would the effective yield on a taxable bond

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Reference no: EM13282441

Consider a tax-free municipal bond whose nominal yield is 6.00%.

(a) What is the effective rate on the bond if the investor is in the 30% tax bracket?

(b) How high would the effective yield on a taxable bond have to rise before the investor would prefer the taxable bond to the 6% tax-free bond?

Reference no: EM13282441

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