A 475% Coupon Bond Issued by the Provincial Government of Quebec

question 67

Multiple Choice

A 4.75% coupon bond issued by the provincial government of Quebec 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 tax-free municipal bond if the investor is in the 28% marginal tax bracket?

• A) 1.1%
• B) 5.8%
• C) 6.6%
• D) 7.3%
• E) 9.7%

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