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An 85% Coupon Bond Issued by the Provincial Government of Nova

Question 11

Multiple Choice

An 8.5% coupon bond issued by the provincial government of Nova Scotia 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 25% marginal tax bracket?


A) 2.13%
B) 12.25%
C) 11.33%
D) 13.53%
E) 34.71%

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