Series 7 - General Securities Representative Exam

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William is in the 37% tax bracket. Which of the following bonds will provide William with the highest after tax yield?

6 % GO bond
A
7% T-bond
B
8% Corporate Bond
C
8% Collateral Trust Bond
D

Explanations

GO bonds are not federally taxable. Using the tax-equivalent yield TEY equation, we can see that the GO muni bond will have the highest yield. muni yield / 100% - tax bracket (37%) = 9.52%

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