Holding risk constant, an investor earning 6% from a tax-exempt bond who is in a 25% tax bracket would be indifferent between that bond and:
A) A taxable bond with a 8% yield
B) A taxable bond with a 4.5% yield
C) A taxable bond with a 6.25% yield
D) A taxable bond with a 7.5% yield

Question

Quizplus · Accepted Answer

The Answer of Holding risk constant, an investor earning 6% from a tax-exempt bond who is in a 25% tax bracket would be indifferent between that bond and:
A) A taxable bond with a 8% yield
B) A taxable bond with a 4.5% yield
C) A taxable bond with a 6.25% yield
D) A taxable bond with a 7.5% yield

Holding Risk Constant, an Investor Earning 6% from a Tax-Exempt