A 5.5%, 20-year municipal bond is currently priced to yield 7.2%. For a taxpayer in the 33% marginal tax bracket, this bond would offer an equivalent taxable yield of
A) 8.20%.
B) 10.75%.
C) 11.40%.
D) 4.82%.

Name: A 5.5%, 20-year municipal bond is currently priced to yield 7.2%. For a taxpayer in the 33% marginal tax bracket, this bond would offer an equivalent taxable yield of A) 8.20%. B) 10.75%. C) 11.40%. D) 4.82%.
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Question

Quizplus · Accepted Answer

0.072 = r(1 - t); 0.072 = r(0.67); r = 0.072/0.67; r = 0.1075 = 10.75%.

A 55%, 20-Year Municipal Bond Is Currently Priced to Yield 7