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In this paper, we study the performance of 10.7-Gb/s nonreturn-to-zero (NRZ) and return-to-zero (RZ) on-off keying signals in the joint presence of first-order polarization mode dispersion (PMD) and chromatic dispersion (CD) based on optical signal-to-noise ratio penalty measurements. Our investigations show that the tolerance of RZ to first-order PMD is severely reduced by the presence of typical values of residual CD. Three different receiver strategies are studied: 1. unequalized threshold detection; 2. combined feed-forward and decision-feedback equalization; and 3. maximum-likelihood sequence estimation (MLSE). In all three cases, the presence of CD eliminates the advantage of RZ over NRZ in terms of PMD tolerance. For NRZ, we find that the MLSE improves the tolerance to first-order PMD by 60%-70%, even in the presence of residual CD.