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Suppose that your marginal federal income tax rate is 40%, and the yield on thirty-year U.S. Treasury bonds is 4.5%. You would be indifferent between buying a thirty-year Treasury bond and buying a thirty-year municipal bond issued within your state (ignoring differences in liquidity, risk, and costs of information) if the municipal bond has a yield of Group of answer choices 10.0%. 2.8%. 1.8%. 2.7%.

Sagot :

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Answer:

2.7%

Explanation:

Calculation for the municipal bond yield

Municipal bond yield=(1-.4)*0.045

Municipal bond yield=.6*.045

Municipal bond yield=0.027*100

Municipal bond yield=2.7%

Therefore based on the information given You would be indifferent between buying a thirty-year treasury bond and buying a thirty- year municipal bond issued within your state if the municipal bond has a yield of 2.7%

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