What yield on the municipal bonds would make you indifferent

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Question: You are comparing a municipal bond and a U.S. Treasury bond as a possible investment for your corporation. Both bonds have the same maturity, and both bonds are equally risky and equally liquid. The Treasury bonds yield 7 percent. Your corporation's marginal income tax rate is 40 percent. What yield on the municipal bonds would make you indifferent between the municipal bond and the Treasury bond?

Reference no: EM131959748

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