A. What are the tax risks associated with municipal bonds? B. What is the equivalent taxable yield...

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Finance

A. What are the tax risks associated with municipalbonds?
B. What is the equivalent taxable yield for an investorwith a 35% marginal tax rate who could buy a tax-exempt municipalbond with a yield of of 8.5%?
C. Why might the equivalent taxable yield be limited inhow it measures the relative value of a tax-exempt bond versus ataxable bond?

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Municipal Bonds are debt securities which are issued by government entities There are many risks associated with municipal bonds like Credit risk Call risk etc Similarly Tax implications are also there As interest rate is less than may be less than that of fully taxable bonds but may See Answer

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A. What are the tax risks associated with municipalbonds?B. What is the equivalent taxable yield for an investorwith a 35% marginal tax rate who could buy a tax-exempt municipalbond with a yield of of 8.5%?C. Why might the equivalent taxable yield be limited inhow it measures the relative value of a tax-exempt bond versus ataxable bond?