A municipal bond has a YTM of 5.19 percent while the YTM of a comparable taxable bond is 7.78 percent. What is the tax rate that will make an investor indifferent between the municipal bond and the taxable bond? Multiple Choice4 3.65% 34.54% 45.37 % 52.76 % 37.99%
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- Corporate bonds issued by Johnson Corporation currently yield 8%. Municipal bonds of equal risk currently yield 6%. At what tax rate would an investor be indifferent between these two bonds?A municipal bond carries a coupon of 6.75% and is trading at par. What is the equivalent taxable yield to a taxpayer in a combined federal plus state 34% tax bracket?You can invest in taxable bonds that are paying a yield of 9.7 percent or a municipal bond paying a yield of 7.95 percent. Assume your marginal tax rate is 21 percent. a. Calculate the after-tax rate of return on the taxable bond? (Round your answer to 2 decimal places. (e.g., 32.16))b. Which security bond should you buy?
- A bond issued by the Irbid Municipal is priced to yield 7.80%. If you are in the 15% tax bracket his bond would provide you with an equivalent taxable yield ofAn investor is comparing the following two bonds: a bond from ABC Corp which pays an interest rate of 9 percent per year and a municipal bond which pays an interest rate of 7.9 percent per year. The investor is in the 22 percent tax bracket. Which bond will give the investor a higher after-tax interest rate and for which reason? a. The ABC bond because it pays a 9 percent interest rate, while the municipal bond only pays 7.9 percent. b. None of these is correct. c. The ABC bond because it pays an equivalent after-tax rate of 11.5 percent, while the municipal bond pays out an equivalent after-tax rate of 10.1 percent. d. The municipal bond because it pays an equivalent after-tax rate of 7.9 percent, while the ABC bond pays out an after-tax 7.02 percent interest rate. e. The municipal bond because it pays an equivalent after-tax rate of 7.9 percent, while the ABC bond pays out an equivalent after-tax rate of 2.0 percent.A municipal bond has a yield to maturity of 3.8 percent. What corporate bond yield would make an investor in the 29 percent tax bracket indifferent between two bonds, all else the same?
- You can invest in taxable bonds that are paying a yield of 9.50 percentor a municipal bond paying a yield of 7.75 percent. If your marginaltax rate is 21 percent,which security bond should you buy?The current yield on a municipal bons is 6%. What would the equivalent taxable yield of this bond to a taxpayer in a 35% tax bracket? Enter your answer as a decimal not percentage and round your answer to 4 decimal placesSuppose that short-term municipal bonds currently offer yields of 4%, while comparable taxable bonds pay 5%. Required: Which gives you the higher after-tax yield if your combined tax bracket is: Higher After-Tax Yield a. Zero Municipal bond b. 10% Taxable bond c. 20% Municipal bond d. 30% Neither
- Municipal bonds are yielding 4.4 percent if they are insured and 4.7 percent if they are uninsured. Your marginal tax rate is 28 percent and the inflation rate is 1.645%. Your equivalent taxable yield on the insured bonds is _____ percent and on the uninsured bonds is _____ percent. How would your answers change if your marginal tax rate falls to 13.5% and the inflation rate increases to 2.0639%? What would happen to the YTM of the uninsured bond if negative news was announced resulting in a decline in its credit rating? What would happen to the YTM of the insured bond if it suddenly lost its insurance?A municipal bond carries a coupon rate of 4.25% and is trading at par. What would be the equivalent taxable yield of this bond to a taxpayer in a 35% combined tax bracket? (Round your answer to 2 decimal places.)Assume a municipal bond has a yield of 5.75% and corporate bond of comparable maturity and credit rating has a yield of 7%. For each marginal tax rate below calculate the after tax yield for the municipal bond and the corporate bond Type your answer below as a percentage (not decimals) 10% Muni: Corporate: * 20% Muni:! Corporate: Corporate 25% Muni: Muni:| Corporate: · 30%