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Question
The Wesson Wisconsin State Bank has purchased a bank-qualified municipal bond with a coupon rate of 7.5%. The bank had to borrow funds to make this purchase at a cost of 6%. The bank is in the 25% tax bracket. What is the net after-tax return on this bank-qualified municipal bond?
A. 7.5%
B. 2.7%
C. 3.0%
D. 1.5%
E. None of the options is correct
Answer
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