If you are holding a municipal bond that is trading at par to yield 6%, by...

If you are holding a municipal bond that is trading at par to yield 6%, by how much will your after-tax yield change if your federal income tax bracket increases from 15% to 20%. Assume there are no state or local taxes

Expert Solution

Municipal bonds do not incur federal tax and are thus tax-exempt, so it does not make any difference if the tax bracket increased, the rate will still be the same at 6%, thus the answer is : change in yield - 0%

jeff jeffy answered 2 years ago

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