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79 80 Consider the decision to purchase either a 5-year corporate bond or a 5-year municipal bond. 81 The corporate bond is a 12% annual coupon bond with a par value of $1,000. It is currently yielding 11.5%. 82 The municipal bond has an 8.5% annual coupon and a par value of $1,000. It is currently yielding 7%. 83 Which of the two bonds would be more beneficial to you? Assume that your marginal tax rate is 35%. 84 85 Municipal Bond 86 Purchase Price 87 After-tax Coupon Payment 88 Par Value 89 Calculated YTM 90 91 Corporate Bond 92 Purchase Price 93 After-tax Coupon Payment 94 Par Value 95 Calculated YTM 96 97 Which of the two bonds would be more beneficial to you: 98 99 Why:

79 80 Consider the decision to purchase either a 5-year corporate bond or a 5-year municipal bond. 81 The corporate bond is a 12% annual coupon bond with a par value of $1,000. It is currently yielding 11.5%. 82 The municipal bond has an 8.5% annual coupon and a par value of $1,000. It is currently yielding 7%. 83 Which of the two bonds would be more beneficial to you? Assume that your marginal tax rate is 35%. 84 85 Municipal Bond 86 Purchase Price 87 After-tax Coupon Payment 88 Par Value 89 Calculated YTM 90 91 Corporate Bond 92 Purchase Price 93 After-tax Coupon Payment 94 Par Value 95 Calculated YTM 96 97 Which of the two bonds would be more beneficial to you: 98 99 Why:

EBK CONTEMPORARY FINANCIAL MANAGEMENT
EBK CONTEMPORARY FINANCIAL MANAGEMENT
14th Edition
ISBN:9781337514835
Author:MOYER
Publisher:MOYER
Chapter8: Analysis Of Risk And Return
Section: Chapter Questions
Problem 9P
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79 80 Consider the decision to purchase either a 5-year corporate bond or a 5-year municipal bond. 81 The corporate bond is a 12% annual coupon bond with a par value of $1,000. It is currently yielding 11.5%. 82 The municipal bond has an 8.5% annual coupon and a par value of $1,000. It is currently yielding 7%. 83 Which of the two bonds would be more beneficial to you? Assume that your marginal tax rate is 35%. 84 85 Municipal Bond 86 Purchase Price 87 After-tax Coupon Payment 88 Par Value 89 Calculated YTM 90 91 Corporate Bond 92 Purchase Price 93 After-tax Coupon Payment 94 Par Value 95 Calculated YTM 96 97 Which of the two bonds would be more beneficial to you: 98 99 Why:
Transcribed Image Text:79 80 Consider the decision to purchase either a 5-year corporate bond or a 5-year municipal bond. 81 The corporate bond is a 12% annual coupon bond with a par value of $1,000. It is currently yielding 11.5%. 82 The municipal bond has an 8.5% annual coupon and a par value of $1,000. It is currently yielding 7%. 83 Which of the two bonds would be more beneficial to you? Assume that your marginal tax rate is 35%. 84 85 Municipal Bond 86 Purchase Price 87 After-tax Coupon Payment 88 Par Value 89 Calculated YTM 90 91 Corporate Bond 92 Purchase Price 93 After-tax Coupon Payment 94 Par Value 95 Calculated YTM 96 97 Which of the two bonds would be more beneficial to you: 98 99 Why:
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