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What would the correct risk premium on 10-year municipal bond with yield of 2.5%, given that 10-year Treasuries pay 3.0% and the investor is in 30% income tax bracket?

Managerial Economics: A Problem Solving Approach

5th Edition

ISBN:9781337106665

Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor

Publisher:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor

Chapter5: Investment Decisions: Look Ahead And Reason Back

Section: Chapter Questions

Problem 5.2IP

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What would the correct risk premium on 10-year municipal bond with yield of 2.5%, given that 10-year Treasuries pay 3.0% and the investor is in 30% income tax bracket?

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