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An investor in the 28 percent tax bracket is trying to decide which of two bonds to select: one is a 5.5 percent U. S. Treasury bond selling at par; the other is a municipal bond with a 4.25 percent coupon, which is also selling at par. Which of these two bonds should the investor select? Why?

  • Finance -

    Interest on U.S. Treasury bonds is taxed at 28%. Interest on municipal bonds is not taxed.

    Do the math to figure out which is the better buy.

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