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Leya [2.2K]
3 years ago
14

)An investor is trying to decide between a muni paying 5.75 percent or an equivalent taxablecorporate paying 8.25 percent. What

is the minimum marginal tax rate the investor must have toconsider buying the municipal bond
Business
1 answer:
In-s [12.5K]3 years ago
4 0

Answer: 30.3%

Explanation:

Because taxes are not paid on municipal bond interest, their interest rates are usually lower with the difference accounting for the taxes paid.

For a municipal bond to be similar to a corporate bond, the tax rate must be such that it makes them equal:

Municipal bond return = Corporate bond return * (1  - tax rate)

5.75% = 8.25% * (1 - tax)

1 - tax rate = 5.75% / 8.25%

1 = 0.6969697 + Tax rate

Tax rate = 1 - 0.6969697

= 30.3%

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Answer:

True

Explanation:

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8 0
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7 0
3 years ago
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solniwko [45]

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I hope this helps.

5 0
3 years ago
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