Interest on U.S. Treasury bonds is taxed at 28%. Interest on municipal bonds is not taxed.
Do the math to figure out which is the better buy.
An investor in the 28 percent tax bracket is trying to decide which of two bonds to select: one is a 5.5 percent U. S. Treasury bond selling at par; the other is a municipal bond with a 4.25 percent coupon, which is also selling at par. Which of these two bonds should the investor select? Why?
1 answer