A tax-free municipal bond pays an effective annual rate of 7.2%.If your tax rate is 30%,then the effective annual rate that a comparable corporate bond would have to offer you to earn an equivalent after-tax return would be closest to:

Question

Quizplus · Accepted Answer

To find the equivalent corporate bond rate, divide the municipal bond rate by (1 - tax rate): 7.2% / (1 - 0.30) = 10.3%.

A Tax-Free Municipal Bond Pays an Effective Annual Rate of 7.2%.If