Explore BrainMass

Explore BrainMass

    Understanding Municipal Bonds

    This content was COPIED from BrainMass.com - View the original, and get the already-completed solution here!

    What are municipal bonds? We are comparing the equivalent tax-free rate of two investments: 1) A taxable corporate bond that is at a rate of 10%, with a marginal tax of 30%, and 2) A tax-free municipal bond that is at a rate of 8%. Which of the two investments offers a better return considering the tax impact?

    © BrainMass Inc. brainmass.com June 4, 2020, 3:57 am ad1c9bdddf
    https://brainmass.com/business/bond-valuation/understanding-municipal-bonds-544724

    Solution Preview

    Municipal bonds are debt issued by the municipality.

    Let us now compare the equivalent tax-free rate of two investments: 1) A ...

    Solution Summary

    Solution compares the taxable corporate bond that is at a rate of 10%, with a marginal tax of 30%, and a tax-free municipal bond that is at a rate of 8%.

    $2.19

    ADVERTISEMENT