Answer:
Marginal tax = 25%
Explanation:
To be indifferent between the bonds then return from both types of bond should be same. The municipal bond yields are tax free so tax can be imposed on the corporate bonds.
Thus, the (9 - 6.75) / 9 = 0.25 or 25%
So, a marginal tax of 25% should be imposed in order to be indifferent between the bonds.
