A municipal bond has yield to maturity of 5.08 percent. A comparable corporate bond has yield...

Question

Question

A municipal bond has yield to maturity of 5.08 percent. A comparable corporate bond has yield to maturity of 7.24 percent. Wh

Answer 1

Answer #1

Post tax yield on corporate bond = Yield * (1 - Tax)

Post tax yield = 7.24% * (1 - 28%)

Post tax yield = 5.21%

Given post tax yield of corporate bond is higher than yield of municipal bond (5.08%), correct option is Option A

Answer 2

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