A municipal bond has a YTM of 4.59 percent while the YTM of a comparable taxable...
A municipal bond has a YTM of 4.59 percent while the YTM of a comparable taxable bond is 7.48 percent. What is the tax rate that will make an investor indifferent between the municipal bond and the taxable bond?
Homework Answers
| Municipal bond rate = Taxed bond rate * (1-Tax rate) |
| 4.59 = 7.48 * (1-Tax rate) |
| Tax rate% = 38.64 |
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