Indifferent between the corporate and municipal bonds

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Reference no: EM131883691

An investor faces a 32% marginal tax rate and is considering purchasing a 5-year bond. She determines that she can purchase an AA-rated corporate bond yielding 1.8%. She also considers an AA-rated tax-free municipal bond. What is the breakeven yield for the investor to be indifferent between the corporate and municipal bonds, all else equal?

Reference no: EM131883691

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