A client in the 33 percent marginal tax bracket is compar- ing a municipal bond that offers a 4.50 percent yield to maturity and a similar risk corporate bond that offers a 6.45 percent yield. Which bond will give the client more profit after taxes? (LG 6-2)

Q: times interest earned ratio

A: Times interest earned ratio shows how many times the interest expense is covered by operating…

Q: Assume that your bond has an interest rate of 10 percent when other bonds are paying 12 percent.…

A: IF OTHER BONDS ARE GIVING 12 % INTEREST AND OUR BOND IS GIVING 10 %   Bonds are fixed-income…

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: Problem 1-44 (LO 1-3, LO 1-4) (Algo) Hugh has the choice between investing in a City of Heflin bond…

A: Interest rate on City of Heflin bond = 3.45%Interest rate on Surething Incorporated bond = 4.75%Tax…

Q: An investment firm recommends that a client invest in bonds rated AAA, A, and B. The average yield…

A: Bonds are debt instruments issued by companies. The issuing company pays periodic coupons or…

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: 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: Fergie has the choice between investing in a State of New York bond at 10.0 percent and a Surething…

A: "Investment" refers to the action of placing funds or resources into things or endeavors in the…

Q: bond

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

Q: K Before-tax cost of debt Gronseth Drywall Systems, Inc., is in discussions with its investment…

A: To accurately determine the before-tax cost of debt, we need to solve for the yield to maturity…

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: A municipal bond has a YTM of 4.11 percent while the YTM of a comparable taxable bond is 6.16…

A: The municipal bonds are tax-free bonds. The tax equivalent yield can be calculated using the…

Q: Hui is currently considering investing in municipal bonds that earn 7.50 percent interest, Company…

A: Municipal bonds are tax free that means no taxes are to be paid on the interest income but corporate…

Q: ou have just purchased a long term government bond for $1200 and a short term government bond for…

A: Long term bonds have higher duration than short term bonds, and thus are most sensitive to interest…

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: Suppose that bond A and bond B are identical municipal issues, except that bond A is a general…

A: A general obligation bond is backed by 'full faith and credit' of the issuing entity. Here there are…

Q: 1. A municipal bond has a coupon rate of 5.83 percent and a YTM of 5.53 percent. If an investor has…

A: The yield at which a pretax bond is equal to a tax-free bond is equivalent to a pretax yield. This…

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: Cookeville City Council is trying to issue a municipal bond that is tax free. A current taxable bond…

A: A bond is a kind of debt security issued by the government and private companies to the public for…

Q: Assume that Larry's marginal tax rate is 25%. If corporate bonds pay 7.4% interest, what interest…

A: We must compare the after-tax return on the corporate bond to the pre-tax return on the municipal…

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 the tax exempt equivalent yield on a 8% bond yield given a marginal tax rate of 25%? O 6.00%…

A: Tax-exempt yield can be referred to as the yield on the security that an investor may enjoy after…

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: A client is considering an investment in an 8%, $1,000 par value, 5-year Government of Canada bond.…

A: Solution:-Fair value of bond means the price at which a bond should trade in the market. It is the…

Q: If current Corporate Bond Rates are 4% and Municipal Bond Rates are 3%, at what marginal tax rate…

A: Corporate bond rate = 4% Municipal bond rate = 3%   Equivalent yield is the yield on a taxable…

Q: Municipal bond offers YTM 5.7%, where as corporate bond offers 5% yield. both has the same maturity.…

A: The municipal bonds are generally offering with the interest payment tax exemption and any interest…

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: Which is the better return for the investor on an after-tax basis? Please answer either corporate or…

A: Corporate bonds are taxable but Municipal bonds are not.Corporate bonds are currently yielding…

Q: If a 5 yr. AA- General Dynamics note is yielding a 35% tax bracket investor 7.56125% while a…

A: Tax equivalent yield is used to determine the yield from a municipal bond or a note.

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: Meyer of Georgia wants to issue bonds to pay to make electric Avenue higher the current interest…

A: The cost of debt: The coupon rate at which an entity can issue bonds is its cost of debt. However,…

Q: Fergie has the choice between investing in a State of New York bond at 4.4 percent and a Surething…

A: Given: Marginal tax rate =30% Options available: Investing in a State of New York bond at…

Q: ultiple Choice 5.56 percent 3.87 percent

A: In this we have to find out the taxable equivalent interest rate.

Q: Suppose currently 10-year Treasury bond yields 0.9% and 10-year municipal bond offers 0.8% yield.…

A: Spread or risk premium is rate of return above the risk free rate and taxable rate of return of…