A B E H J K M N 3. What price should the municiple bond trade at in order to have a YTM 70 basis points above the treasury bond of the same maturity. Assume a 35% tax rate Show your calculations Muni Bond Price 0 Coupon rate (paid annually (1) Face value Maturity YTM Diff C Treasury Bond Price Coupon rate (paid semi annually D 5%) 1000 Face valu 5 Maturity 1150 6% 1000 5 2.767% F G Treasury + 70bps spread assuming the municiple bond is insured against default? L
A B E H J K M N 3. What price should the municiple bond trade at in order to have a YTM 70 basis points above the treasury bond of the same maturity. Assume a 35% tax rate Show your calculations Muni Bond Price 0 Coupon rate (paid annually (1) Face value Maturity YTM Diff C Treasury Bond Price Coupon rate (paid semi annually D 5%) 1000 Face valu 5 Maturity 1150 6% 1000 5 2.767% F G Treasury + 70bps spread assuming the municiple bond is insured against default? L
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
Problem 1PS
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Transcribed Image Text:035
20
21
22
23
24
25
26
28
Y
30
Coupon
rate
(paid
annually
fx |
)
Face valu
Maturity
YTM
Diff
| 100% | $
T
+
E
Sheet1
%
A
B
J
M
N
3. What price should the municiple bond trade at in order to have a YTM 70 basis points above the treasury bond of the same maturity. Assume a 35% tax rate
Show your calculations
Muni Bond
Price
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0.00 123 Default (Ca... 11
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C
Treasury Bond
Price
Coupon
rate
(paid
semi
annually
5% )
1000 Face valu
5 Maturity
HOTEZIONE
1150
6%
1000
5
120 Price
2.767%
TANE DINE
4. At what tax rate will an investor be indifferent between the below bonds, assuming the municiple bond is insured against default?
Show your calculations
Muni Bond
Price
Treasury Bond
100.45
20
image.png
F
Treasury + 70bps spread
E
BISA B
COME FARE
I
L
op
K
19
DY - E-
P
7
64°F C
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