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 - Tax Rate)

0.054 = 0.07 ( 1- Tax rate)

0.054 = 0.07 - 0.07 Tax Rate

0.054-0.07 = 0.07 Tax Rate

0.016 = 0.07 Tax Rate

Tax Rate = 0.016/0.07 i.e 22.86%

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