Municipal bonds than investors in lowest tax-bracket

Reference no: EM133655509

A municipal bond yields 7.0%.

A corporate bond on comparable credit quality and maturity yields 8.0%.

1. At what marginal tax rate would an investor be indifferent between the two bonds?

2. Why are investors in the highest tax-bracket more inclined to invest in municipal bonds than investors in lowest tax-bracket?

Reference no: EM133655509

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