A taxable issue yields 7 percent, and a similar municipal issue yields 5.4 perce

Question

A taxable issue yields 7 percent, and a similar municipal issue yields 5.4 percent. What is the critical marginal tax rate? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places. Omit the "%" sign in your response.)

A taxable issue yields 7 percent, and a similar municipal issue yields 5.4 percent. What is the critical marginal tax rate? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places. Omit the "%" sign in your response.)

Explanation / Answer

Municipal yield = taxable yield * ( 1 - critical tax rate)

5.4 = 7 * ( 1 - X)

X = 0.22857 = 22.86%

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