A 65 Percent Coupon Bond Issued by the State of California

question 42

Multiple Choice

A 6.5 percent coupon bond issued by the State of California sells for $1,000.What coupon rate on a corporate bond selling at $1,000 par value would produce the same after tax return to the investor as the municipal bond if the investor is in the 26 percent marginal tax bracket?

• A) 1.69%
• B) 11.25%
• C) 8.78%
• D) 14.63%
• E) 25%

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