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?

Q: What's the taxable equivalent yield on a municipal bond with a yield to maturity of 3.8 percent for…

A: Taxable equivalent yield on a municipal bond refers to the return that we require on a taxable…

Q: Municipal bonds are yielding 4.4 percent if they are insured and 4.7 percent if they are uninsured.…

A: Bonds are the debt security which is offered or issued by the corporates or the governments to…

Q: Suppose the state of Indiana issued a tax-exempt bond to pay for student fees in its universities.…

A: The tax-equivalent yield, also known as the After-tax yield, is used to establish if an investment…

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A: Bonds are long-term debt instruments by which companies raise funds. They require a fixed interest…

Q: Suppose you invest in a municipal bond that pays a yield of 149%. If your marginal tax is 15%, what…

A: A municipal bond is a government debt security issued to raise long-term debt funds. The yield…

Q: the bond. If the current one-year interest rate on government bonds is 8 percent, then the price…

A: Time Period = 2 years Face Value = 5000 Coupon = Coupon Rate * Face Value = 6%*5000 = 300 Interest…

Q: Find the equivalent taxable yield of a short-term municipal bond currently offering yields of 4% for…

A: With the given information, we can calculate the equivalent taxable yield using the steps below:

Q: Rossiana Marie, Inc. lists a bond as Ross 9s34 and shows the price as selling for 88.875% of its…

A: Value of a bond refers to the right price of the bonds. The right price or intrinsic value helps in…

Q: Short-term municipal bonds currently offer yields of 4%, while comparable taxable bonds pay 5%.…

A: With the given information, we can compare the yields as follows:

Q: A municipal bond you are considering as an investment currently pays a yield of 6.76 percent.   a.…

A: The tax-equivalent yield is the rate of return that a taxable bond must achieve in order to match…

Q: A bond issued by the New York state is priced to yield 6.30 % . If you are in the 25 % tax bracket…

A: Bonds are a kind of debt financial instrument which is a fixed-income investment vehicle that…

Q: bond

A: 1) To calculate which bond is more beneficial we have to calculate the YTM. Formula for YTM is: YTM…

Q: What’s the taxable equivalent yield on a municipal bond with a yield to maturity of 4.1 percent for…

A: The formula to compute equivalent taxable yield is as follows:

Q: b) You can invest in taxable bonds that are paying a yield of 9.50% or a municipal bond paying a…

A: A security bond is a legally enforceable promise to pay the government if you or your employee…

Q: A municipal bond carries a coupon of 6.75% and is trading at par. What is the equivalent taxable…

A: The formula to compute equivalent taxable yield is as follows:

Q: Suppose a municipal bond offers a 4% rate of interest. A corporate bond comes with a 6% coupon but…

A: In order to meet the capital expenditure like construction of building for the public, highways, etc…

Q: what is the equIvalent yield on the taxable bond?

A: Tax Equivalent Yield: It is the return needed for a taxable bond to equal the yield of the…

Q: Using the cost-of-debt approximation formula, determine the pre-tax cost for a bond that sells at $…

A: Given: Current price of the bond =$925 Coupon amount =$85 Flotation cost = $5 Years = 20

Q: If the municipal bond rate is 6% and the corporate bond rate is 8%, what is the marginal tax rate,…

A: The taxable equivalent yield is 8% in this scenario whereas tax free yield is 6%. We need to find…

Q: An LGU bond offers a yield of 8.5%. What rate should a corporation offer on its bond so investors…

A: Bonds are the liabilities of the company which is issued to raise the funds required to finance the…

Q: ou have just purchased a long term government bond for $1200 and a short term government bond for…

A: Long term bonds have higher duration than short term bonds, and thus are most sensitive to interest…

Q: Rossiana Marie, Inc. lists a bond as Ross 9s34, and shows the price as selling for 88.875% of its…

A: A bond is a financial debt instrument that is sold by large business entities or governments to…

Q: An investor is comparing the following two bonds: a bond from ABC Corp which pays an interest rate…

A: Municipal bonds are tax free interest bonds. Therefore, no tax will be levied on interest…

Q: You are trying to decide between a par value corporate bond carrying a coupon rate of 6.25% per year…

A: A loan to a corporation or government that pays back a fixed rate of return is a bond.

Q: A bond issued by the Irbid Municipal is priced to yield 7.80%. If you are in the 15% tax bracket his…

A: Tax Equivalent Yield = Tax free municipal yield / (1 -tax rate)

Q: The coupon rate on a tax-exempt bond is 5.6%, and the rate on a taxable bond is 8%. Both bonds sell…

A: Tax-exempt bond is 5.6%.  By using the formula of Equivalent taxable yield, The formula of…

Q: ake Baldwin is looking for a fixed-income investment. He is considering two bond issues: A Treasury…

A: We need to compute tax adjusted yield for both the bonds

Q: An investor purchases a bond worth Rp. 100 million, with a 15% interest tax on the bond. The…

A: Inflation rate and taxes affects the real value received by an investor.  These are to be adjusted…

Q: What would you pay for a $65,000 debenture bond that matures in 10 years and pays $9,100 a year in…

A: Bond Price: It is the price paid by the bondholder for investing in the bond. Bond price is…

Q: What is the taxable equivalent yield on a municipal bond with a yield to maturity of 4 percent for…

A: In this question we need to compute the taxable equivalent yield on a municipal bond.

Q: Which will you prefer to invest your $1,500: a) a two year bond with interest rate of 9 percent or…

A: Investment amount = $ 1500 Option1 = 9% interest rate bond for 2 years Option2 = 8% bond in year 1…

Q: You pay $5600 for a municipal bond. When it matures after 15 years, you receive $11,000 The total…

A: Pay for Municipal Bond  $ 5600 Matures After 15 Years. We received $11000 Total Return calculated as…

Q: The current yield on a municipal bons is 6%. What would the equivalent taxable yield of this bond…

A: Yield on municipal bond is tax free. But yield on corporate bond is taxable. Given: Yield on…

Q: what is the equivalent yield on the taxable bond?

A: Equivalent Yield on Taxable Bond: It refers to the yield on the taxable bond needed to be made equal…

Q: Suppose your marginal federal income tax rate is 25 percent. 1. What is your after-tax return from…

A: The question is to study the impact on tax rate on yield of different types of bonds, in general…

Q: Suppose you invest in a municipal bond that pays a yield of 4. If your marginal tax is 17%, what is…

A: Here, Municipal Bond Yield is 4% Marginal tax Rate is 17%

Q: 1. A bond issued by the Irbid Municipal is priced to yield 7.80%. If you are in the 15% tax bracket…

A: Given, Tax rate = 15% Yield = 7.8%

Q: Consider the following bond quote: a municipal bond quoted at 101.25. If the municipal bond has a…

A: In the given question we need to compute the price of the bond in dollars.

Q: Suppose you invest in a municipal bond that pays a yield of 9%. If your marginal tax is 17%, what is…

A: The tax-equivalent yield is the rate of return necessary for a taxable bond to equal the rate of…