Corporate bonds issued by Johnson Corporation currently yield 11.5%. Municipal bonds of equal risk currently yield 6%. A...
Corporate bonds issued by Johnson Corporation currently yield 11.5%. Municipal bonds of equal risk currently yield 6%. At what tax rate would an investor be indifferent between these two bonds? Round your answer to two decimal places.
Homework Answers
corporate bond yield*(1-tax rate)=municipal bond yield
11.5*(1-tax rate)=6
1-tax rate=(6/11.5)
tax rate=1-(6/11.5)
which is equal to
=47.83%(Approx).
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