Requirement 1
To Calculate:
The equivalent taxable yield of municipal bond currently offering yield of 4% when the tax bracket of the investor is 0%
Introduction:
Municipal bonds are bonds which are given by the local and state governments to fund several projects. The interest income earned from these bonds is exempted from federal income
Requirement 2
To Calculate:
The equivalent taxable yield of municipal bond currently offering yield of 4% when the tax bracket of investor is 10%
Introduction:
Municipal bonds are bonds which are given by the local and state governments to fund several projects. The interest income earned from these bonds is exempted from federal income taxation. In all other regards, these bonds are similar to the corporate bonds and the Treasury bonds. When these bonds mature, or when they are sold for higher price than the price of purchase, the
Requirement 3
To Calculate:
The equivalent taxable yield of municipal bond currently offering yield of 4% when the tax bracket of investor is 20%
Introduction:
Municipal bonds are bonds which are given by the local and state governments to fund several projects. The interest income earned from these bonds is exempted from federal income taxation. In all other regards, these bonds are similar to the corporate bonds and the Treasury bonds. When these bonds mature, or when they are sold for higher price than the price of purchase, the capital gain taxes have to be paid.
Requirement 4
To Calculate:
The equivalent taxable yield of municipal bond currently offering yield of 4% when the tax bracket of investor is 30%
Introduction:
Municipal bonds are bonds which are given by the local and state governments to fund several projects. The interest income earned from these bonds is exempted from federal income taxation. In all other regards, these bonds are similar to the corporate bonds and the Treasury bonds. When these bonds mature, or when they are sold for higher price than the price of purchase, the capital gain taxes have to be paid.
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EBK INVESTMENTS
- Suppose you invest in a municipal bond that pays a yield of 9%. If your marginal tax is 29%, what is the equivalent yield on the taxable bond? (write your answer in percentage and round it to 2 decimal places)arrow_forwardAssume your in the 28% tax bracket and purchase a municipal bond with yield of 3.10%. What is the taxable equivalent yield for this investment?arrow_forwardWhat is the taxable equivalent yield on a municipal bond with a yield to maturity of 4 percent for an investor in the 28 percent tax bracket?arrow_forward
- 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 placesarrow_forwardyou invest in a municipal bond that pays a yield of 10%. If your marginal tax is 26%, what is the equIvalent yield on the taxable bond? (write your answer in percentage and round it to 2 decimal places)arrow_forwardCalculate the after-tax cost of debt under each of the following conditions:(a) Interest rate, 12%; tax rate, 25%.(b) Interest rate, 14%; tax rate,34%.(c) Interest rate, 15%; tax rate,40%.arrow_forward
- 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 ofarrow_forwardYou 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?arrow_forwardWhat’s the taxable equivalent yield on a municipal bond with a yield to maturity of 4.1 percent for an investor in the 28 percent marginal tax bracket?arrow_forward
- Suppose you invest in a municipal bond that pays a yield of 4. If your marginal tax is 17%, what is the equvalent yield on the taxable bond? (write your answer in percentage and round it to 2 decimal places)arrow_forwardYou 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?arrow_forwardb) You can invest in taxable bonds that are paying a yield of 9.50% or a municipal bond paying a yield of 7.75%. If your marginal tax rate is 21%, which security bond should you buy? Answer:arrow_forward
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