A state issued muni bond offered at a coupon rate of 4% is preferred over a junk bond of 6% when a taxpayer's federal marginal tax bracket is 30% and their state is 5%. (The investor is a resident of the state the muni is issued in and is also exempt from state taxation.) True False
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- A resident of New York is in the 32% federal tax bracket and the 6% state income tax bracket and is not subject to the federal 3.8% NIIT. Which of the following bonds would offer the resident the highest after-tax yield? 1. Treasury bond paying 4.7%. 2. Corporate bond paying 4.9%. 3. Louisiana Municipal bond paying 3.5%. O 1 only. O 2 only. O 3 only. O 1 and 3 are the same and have the highest after-tax yield.An investor is trying to decide between a muni paying 6.20 percent or an equivalent taxable corporate paying 8.25 percent. What is the minimum marginal tax rate the investor must have to consider buying the municipal bond? 20.0 percent 66.7 percent 80.0 percent 25.0 percent 75.0 percentAn investor is trying to decide between a muni paying 6.20 percent or an equivalent taxable corporate paying 8.25 percent. What is the minimum marginal tax rate the investor must have to consider buying the municipal bond? Group of answer choices 20.0 percent 66.7 percent 80.0 percent 25.0 percent 75.0 percent
- 4) An investor purchases one municipal and one corporate bond that pay rates of return of 7.5% and 10.3%, respectively. If the investor is in the 24% marginal tax bracket, what will be his or her after-tax rates of return on the municipal and corporate bonds?An investor is trying to decide between a muni paying 5.75% or an equivalent taxable corporate paying 8.25%. What is the minimum marginal tax rate the investor must have to consider buying the municipal bond? A. 30.00% B. 25.00% C. 66.67% D. 20.00%Jake Baldwin is looking for a fixed-income investment. He is considering two bond issues: a. A Treasury with a yield of 5.99% b. An in-state municipal bond with a yield of 4.46% Jake is in the 32% federal tax bracket and the 6% state tax bracket. Which bond would provide him with a higher tax-adjusted yield? The taxable equivalent yield on the Treasury bond is. (Round to two decimal places.) (...)
- Suppose the interest rate on a taxable corporate bond is 4 percent while a municipal, tax exempt bond has an interest rate of 3 percent, and they are similar in every other way. Assuming the income tax rate is 30 percent, calculate the after tax interest rate on the corporate bond. Is it higher or lower than the after tax return on the municipal bond?Suppose your marginal federal income tax rate is 25 percent. 1. What is your after-tax return from holding a one-year corporate bond with a yield of 5.25 percent? (1 pt) 2. What is your after-tax return from a holding a one-year municipal bond with a yield of 4 percent? (1 pt) 3. How would you decide which bond to hold? (Assume that Both bonds carry the same risk.) (1 pt)An investor purchases one municipal and one corporate bond that pay rates of return of 7.2% and 9.1%, respectively. If the investor is in the 12% marginal tax bracket, his or her after-tax rates of return on the municipal and corporate bonds would be ________ and ______, respectively. A) 7.2%; 9.1% B) 7.2%; 8.008% C) 6.12%; 7.735% D) 8.471%; 9.1% Provide an accurate answer with justification.
- Suppose the interest rate on a taxable corporate bond is 7 percent while a municipal, tax exempt bond has an interest rate of 5 percent, and they are similar in every other way. Assuming the income tax rate is 30 percent, calculate the after tax interest rate on the corporate bond. Is it higher or lower than the after tax return on the municipal bond? What is the income tax rate that equalizes the after tax return between the corporate bond and the municipal bond.C) Suppose that the interest rate on a taxable corporate bond is 9% and that the marginal tax is 28%. Suppose a tax-free municipal bond with a rate of 6.75% was available. Which security would you choose?An investor is in the 28% federal tax bracket, pays an 9% state tax rate and 4% in local income taxes. For this investor a municipal bond paying 7% interest is equivalent to a corporate bond paying interest O 11.86 % O 10.17% 9.08% 9.68% 8.47%