Cliff Clarkson Is 70 Years Old and Wants to Diversify

question 113

Essay

Cliff Clarkson is 70 years old and wants to diversify his investment portfolio.He must decide if he should invest in tax-free municipal bonds or in corporate bonds.The tax-free bonds are highly rated and pay 4.5%.The corporate bonds are more speculative and pay 6.5%
a.If Cliff is in the 25% tax bracket,what is the taxable equivalent yield for the municipal bond?
b.If you were Cliff,would you choose the municipal bonds or the corporate bonds?
Justify your answer.

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Definitions:

Poaching

The illegal hunting, capturing, or collecting of wildlife, typically violating local or international conservation laws.

Sport Hunting

The practice of hunting wild animals for recreational purposes, often regulated by laws to ensure sustainability and ethical treatment of wildlife.

Non-Native Species

Species living outside their natural range, which have arrived there by human activity, either deliberate or accidental, and can sometimes become invasive.