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After-tax rates of return comparison – years 2004 and 2005

(5)

(4)

(3)

(2)

Table 7.2 (1)

Necessary rate of

After-tax return from a muni bond

return for the investor to

After-tax return from a corporate

After-tax return from a bank

paying a tax-free yield of 6%

realize 6% after tax

bond paying 7.5% taxable

paying 6% taxable

Federal tax bracket

113

7.06% 8.22% 8.57% 9.23%

6.38% 5.48% 5.25% 4.88%

5.10% 4.38% 4.20% 3.90%

6% 6% 6% 6%

15 27 30 35

9.77%

4.61%

3.68%

6%

38.6

1

These figures are based upon the new tax rates for the year 2002 and 2003. They also do not account for possible state and local income taxes that may affect the after-tax returns.

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