16. Debt issued by Southeastern Corporation has a coupon of 10% and currently yields 6.00%. A municipal bond of equ...

Question

Question

Answer 1

Answer #1

After-tax yield tocorporate bond = (1 - 0.35)(0.07) = 4.55%

So,

Municipal Bond is better buy because it's yield is greater than after-tax yield of corporate bond.

Answer 2

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