Which values of marginal tax rate an investor would prefer

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Problem 1: Suppose a municipal bond offers a yield to maturity of 5% and a same maturity corporate bond offers a 4% yield. For which values of the marginal tax rate an investor would prefer to buy the corporate bond?

A. The investor would prefer to buy the corporate bond if she faces a marginal tax rate lower than 40%.
B. The investor would prefer to buy the corporate bond if she faces a marginal tax rate greater than 40%.
C. The investor would prefer to buy the corporate bond if she faces a marginal tax rate lower than 20%.
D. The investor would prefer to buy the corporate bond if she faces a marginal tax rate greater than 20%

Reference no: EM132672459

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