This Q is tormenting me slightly. Am I overthinking it?

FINRA FINRA Series 7
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Hi @Terrence_Boyer, try this similar question from Achievable and see how you do!

https://app.achievable.me/study/finra-series-7/quiz/JDFKY#seed=GBDWR&slug=a-5percent-municipal-bond-is-purchased-by-a-resident-in-the-se…

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Thank you Justin. I believe I get it now :slight_smile:

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I would consider the bond see-saw and analyze it step by step.

If it has a 6% coupon and is quoted on a 7% basis ask yourself - “is it selling at a discount or at a premium?”

If it is at a premium, then the other yields will always be lower than the coupon.
If it is at a discount, then the other yields will always be higher than the coupon.

After tax yield will always be lower than the quoted yield. Think about it, taxes always take away - how could a tax result in more?

Hope this helps.

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the bit of logic for me that was missing was that Munis purchased on the 2ry MKT at a discount = taxable.

This is helpful, thank you!

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