Equilibrium Yield-to-Maturity Assignment | Homework For You

You live in a country with a flat tax rate of 20% on all income, except for certain classes of tax-free municipal bonds. You are considering investing in two bonds that are equally risky in every respect except for their tax treatment. The present yield-to-maturity on the tax-free municipal bond is 3.68%. Estimate what must be the equilibrium yield-to-maturity on the corresponding taxable corporate bond so that will bear the same after-tax return?. Get Finance homework help today

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