At What Point Would an Investor Be Indifferent Between a Bridgford

question 38

Multiple Choice

At what point would an investor be indifferent between a Bridgford corporate bond yielding 8.0 percent and a tax-free municipal bond of equal financial strength if the investor's marginal tax rate is 25 percent?

• A) 5.00 percent
• B) 7.10 percent
• C) 8.00 percent
• D) 9.15 percent
• E) 6.00 percent

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Definitions:

Securities Act

U.S. legislation enacted in 1933 to regulate the sale of securities, primarily aimed at preventing fraud in the securities market.

Negligence

A failure to behave with the level of care that someone of ordinary prudence would have exercised under the same circumstances, resulting in unintended harm to another party.

Accountant

A professional who performs accounting functions such as audits or financial statement analysis according to established principles.

Embezzlement

The theft or misappropriation of funds or property entrusted to one's care by their employer or another party.