5) A 10-year municipal bond yields 4.8%. Your marginal tax rate (including state and federal taxes) is 27%. What interest rate on a 10-year corporate bond of equal risk would provide you with the same after-tax return? a. 3.50% b. 6.25% c. 6.58% d. 6.90%

Q: . Bonds issued last year by Gowen Inc. carried a coupon rate of 7%. Bonds issued today by Gowen Inc.…

A: Solution Concept Cost of debt means the cost that the business has to pay on the debt After tax Cost…

Q: A treasurer is deciding between a taxable security and a tax-exempt security.  The company's…

A: The taxable equivalent yield is the required return for an investor on order to equal the tax free…

Q: €100,000 10-year loan with maturity in 10 years and interest rate of 6%. Debt is to be paid 20% in 2…

A: Tax Shield is a deduction which is allowable in terms of taxable income. It will reduce the amount…

Q: mni.5 Andalusian Limited (AL) can borrow funds at an interest rate of 12.50% for a period of five…

A: The cost of debt is the expense incurred by the company annually to employ the debt capital, it is…

Q: Note: Round your answers for each question as instructed. But carry your unrounded values forward to…

A: Since you have asked a question with multiple parts, we will solve the first 3 parts for you. Please…

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: A $1,000 principal value bond costs $35 in quarterly interest and matures in ten years. How much…

A: 71c. $1,115.57

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…

Q: A $5,000 bond with a bond rate of 5% payable semi-annually was purchased for $4,500, kept for 10…

A: The above answer can be explained as under - Here, the excel has been used to calculate yield to…

Q: 22. An investor in the 30% tax bracket is evaluating two bonds for investment: a corporate bond with…

A: 24The invoice price is the clean price plus the accrued interest.Accrued interest = (Coupon rate /…

Q: the 32% marginal tax bracket, this bond would offer an equivalent taxable yield of O 1) 8.25%. 2)…

A: Municipal yield = 8.75%Tax rate = 32%

Q: An investor purchases a 30-year U.S. municipal bond for $840. The bond’s coupon rate is 10 percent…

A: We know all the cash flows associated with the bond along with the timing. We need to find the…

Q: You are in the 30% tax bracket (federal & state taxes combined). A corporate bond is yielding 9%.…

A: Municipal bonds are provided by the government and are tax free in nature and these are provided to…

Q: A (general obligation) muni bond pays 7% interest. A Treasury bond pays 6.5% interest. Which bond…

A: When deciding between a municipal bond (muni bond) and a Treasury bond based on their interest…

Q: If the municipal bond rate is 6% and the corporate bond rate is 7%, what is the marginal tax rate,…

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

Q: bond

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

Q: You are advising a high income client and speaking on the advantages of investing in Municipal…

A: When investing in municipal bonds, one of the advantages is that the interest income is typically…

Q: Kelly Phillips, an investor who resides in Livingston NJ, has a marginal tax rate of 28%. If a NJ…

A: Yield to maturity = 5.53%  Marginal Tax = 28%

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: 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: What are the market interest rate on Coleman's debt and its component cost of debt? Coupon rate=…

A: YTM is the yield that a bond investor or a bondholder can enjoy for holding a bond investment for…

Q: The coupon rate on an issue of debt is 9%. The yield to maturity on this issue is 11%. The corporate…

A: Cost of debt before tax is the yield to maturity and yield to maturity after tax is the cost of debt…

Q: Assume a municipal bond has a yield of 5.75% and corporate bond of comparable maturity and credit…

A: After tax yield on any investment is the total rate of return that is generated after accounting for…

Q: An investor is in the 28% tax bracket. A corporate bond has a before-tax yield of 8%. What is the…

A: Given details are : Before tax yield = 8% Tax rate = 28% = 0.28 We need to compute the equivalent…

Q: (A) a Bank-backed municipal bond has yield of 10% with maturity of 18 years. Calculate its Yield…

A: "Since you have asked multiple questions, we will solve the first question for you. If you want any…

Q: One-year government bonds yield 4 percent and 2-year government bonds yield 4.5 percent. Assume that…

A: Pure Expectations Theory refers to the concept which tries to determine by predicting what will be…

Q: You live in a world with a flat 21% taxes on all income except for the interest on municip…

A: Municipal bond is issued by government and these bonds are risk free and tax exempted and used by…

Q: What is Curtis's after-tax rate of return on the city of Athens bond?

A: The correct answer is 9.25 percent.

Q: Consider an investor who is in a 30% combined federal plus state tax bracket.  If a corporate bond…

A: Tax Rate = t = 30%Yield on Corporate Bond = r = 5%

Q: Today is January 1, 2003 and you just purchased a 7-year, zero coupon bond with a face value of…

A: given, rate = 6% par = $1000 n = 7 tax = 30%

Q: tax-free municipal bond provides a yield of 4.3%. What is the equivalent taxable bond given a 35%…

A: The bond are the type of investment that provides fixed return to the bond holders as a result of…

Q: Assume a municipal bond has a yield of 5.75% and corporate bond of comparable maturity and credit…

A: After tax Yield on Municipal Bond = Before Tax Yield on Municipal Bond After tax Yield on Municipal…

Q: For the case in Example 11. 7, suppose that Capstone decided to finance the remaining $22 million by…

A: after tax cost of debt=pre tax cost of debt x (1-tax)

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: a. How many of the coupon bonds would you need to issue to raise the $24 million? How many of the…

A: Bond is a fixed income instrument that represents a loan made by investor to the borrower.A zero…

Q: What is the taxable equivalent yield on a 4%, tax-exempt municipal bond for a person in the 30% tax…

A: The tax-equivalent yield is calculates as the tax-exempt yield divided by the difference between…

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: 3. The after tax yield on a bond is (1- tax rate) x yield. Suppose that someone has a tax rate of…

A: After Tax Yield of bond with Taxable Interest = (1 - 0.25)*5%…

Q: 14. An investor purchases a 30-year U.S. government bond for $1,020. The bond's coupon rate is 9…

A: YTM: It is the return generated from a bond when it is hold till the maturity.

Q: What is the tax exempt equivalent yleld on a 9% bond yleld given a marginal tax rate of 23%?…

A: Formula: Tax exempt equivalent yield = Bond yield x ( 100 - Marginal Tax rate )

Q: The coupon rate on an issue of debt is 9%. The yield to maturity on this issue is 12%. The corporate…

A: Here,Coupon rate  is 9%Yield to maturity is 12%Tax rate is 33%