Assume that Javier is indifferent between investing in a city of El Paso bond that pays 3.05 percent interest and a corporate bond that pays 4.4 percent interest. What is Javier's marginal tax rate?
A)88.52 percent
B)50.68 percent
C)40.68 percent
D)30.68 percent
E)None of the choices are correct.

Question

Quizplus · Accepted Answer

Javier's marginal tax rate can be calculated using the formula: Tax Rate = 1 - (Municipal Bond Rate / Corporate Bond Rate). Substituting the given rates: 1 - (3.05% / 4.4%) = 1 - 0.6932 = 0.3068 or 30.68%.

Assume That Javier Is Indifferent Between Investing in a City