Assume that Marsha is indifferent between investing in a city of Destin bond that pays 3.25 percent interest and a corporate bond that pays 4.75 percent interest. What is Marsha's marginal tax rate? (Do not round intermediate computations.)
A)63.16 percent
B)46.58 percent
C)36.58 percent
D)23.29 percent
E)31.58 percent

Question

Quizplus · Accepted Answer

Marsha's marginal tax rate can be calculated using the formula: Tax Rate = 1 - (Municipal Bond Rate / Corporate Bond Rate). Substituting the given rates: 1 - (3.25 / 4.75) = 1 - 0.6842 = 0.3158 or 31.58 percent.

Assume That Marsha Is Indifferent Between Investing in a City