An Investor in a 28% Tax Bracket Is Trying to Decide

question 12

Multiple Choice

An investor in a 28% tax bracket is trying to decide whether to invest in a municipal bond or a corporate bond.She looks up municipal bond yields (r_m) but wishes to calculate the taxable equivalent yield r.The formula she should use is given by ______.

• A) r = r_m * (1 - 28%)
• B) r = r_m/(1 - 72%)
• C) r = r_m * (1 - 72%)
• D) r = r_m/(1 - 28%)

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Definitions:

Public Investors

Individuals or entities that invest in publicly traded securities, such as stocks and bonds, available in financial markets.

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A legal principle that keeps communications between an attorney and their client confidential.

Securities Laws

Legal provisions that govern the trading, offering, and sale of securities to protect investors and ensure market transparency and fairness.

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