Problem

Investment income An investor has a choice of two investments: a bond fund and a stock fun...

Investment income An investor has a choice of two investments: a bond fund and a stock fund. The bond fund yields 7.186% interest annually, which is nontaxable at both the federal and state levels. Suppose the investor pays federal income tax at a rate of 28% and state income tax at a rate of 7%. Determine what the annual yield must be on the taxable stock fund so that the two funds pay the same amount of net interest income to the investor.

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