An investor has a critical marginal tax rate of 28.5 percent when municipal bonds are yielding 5.1 percent. What is the corporate bond yield?

Name: An investor has a critical marginal tax rate of 28.5 percent when municipal bonds are yielding 5.1 percent. What is the corporate bond yield?
Brand: Quizplus
Rating: 4.8 (47 reviews)

Question

Quizplus · Accepted Answer

To find the corporate bond yield equivalent to a municipal bond yield, use the formula: Corporate Yield = Municipal Yield / (1 - Tax Rate). Here, Corporate Yield = 5.1% / (1 - 0.285) = 5.1% / 0.715 = 7.13%.

An Investor Has a Critical Marginal Tax Rate of 28