A Corporate Bond Pays 6

question 67

Multiple Choice

A corporate bond pays 6.25 percent interest.How much would a municipal bond have to pay to be equivalent to this on an after tax basis if you are in the 28 marginal percent tax bracket?

• A)7.82 percent
• B)5.79 percent
• C)4.50 percent
• D)7.26 percent
• E)8.38 percent

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Definitions:

Fraud in the Execution

A situation where a person is deceived into signing a document without understanding its nature, existence, or contents.

Innocent Misrepresentation

A false statement made by someone who believes it to be true, which induces another party to enter into a contract.

Duress

A situation where a person performs an act as a result of violence, threat, or other pressure against the person.

Economic Condition

The state of an economy at a given time, including factors like GDP, unemployment rates, and inflation.