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9 10 11 12 13 14 15 16 17 18 19 nn Coupon rate (paid semi annually 2. Which bond would an investor with in the 28% tax bracket prefer, assuming the municiple bond is insured against default? Show your calculations and explain. Muni Bond Price () Face value Maturity YTM TEY After Tax Y Treasury Bond 101 Price Coupon rate (paid semi annually 2%) 100 Face value 10 Maturity 102 TEY 3% 100 10 TEY

9 10 11 12 13 14 15 16 17 18 19 nn Coupon rate (paid semi annually 2. Which bond would an investor with in the 28% tax bracket prefer, assuming the municiple bond is insured against default? Show your calculations and explain. Muni Bond Price () Face value Maturity YTM TEY After Tax Y Treasury Bond 101 Price Coupon rate (paid semi annually 2%) 100 Face value 10 Maturity 102 TEY 3% 100 10 TEY

Essentials Of Investments
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
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8 9 10 11 12 13 14 15 16 17 18 19 YTM TEY Face valu Maturity YTM TEY After Tax Y 2. Which bond would an investor with in the 28% tax bracket prefer, assuming the municiple bond is insured against default? Show your calculations and explain. Muni Bond Price Coupon rate (paid semi annually + E Sheet1 OphpYfZe9p.png e Type here to search Treasury Bond 101 Price Coupon rate (paid semi annually 2% 100 Face value 10 Maturity ) image.png 102 TEY 100 10 10 E TEY M Z W ***** S SUR G X
Transcribed Image Text:8 9 10 11 12 13 14 15 16 17 18 19 YTM TEY Face valu Maturity YTM TEY After Tax Y 2. Which bond would an investor with in the 28% tax bracket prefer, assuming the municiple bond is insured against default? Show your calculations and explain. Muni Bond Price Coupon rate (paid semi annually + E Sheet1 OphpYfZe9p.png e Type here to search Treasury Bond 101 Price Coupon rate (paid semi annually 2% 100 Face value 10 Maturity ) image.png 102 TEY 100 10 10 E TEY M Z W ***** S SUR G X
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Step 1 Given

As per the given information:

Municipal bond         Treasury bondPrice 101                      Price 102Coupon rate 2%         Coupon rate 3%Face value 100           Face value 100Maturity   10                 Maturity 10

Tax rate - 28%

To determine:

  • Which bond would be preferable to the investor.
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