A municipal bond is offering a tax-free yield of 5.75%. For an investor in the 35% tax bracket, what would be the equivalent taxable yield? (Round to 2 decimal places)
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- You can invest in taxable bonds that are paying a yield of 9.7 percent or a municipal bond paying a yield of 7.95 percent. Assume your marginal tax rate is 21 percent. a. Calculate the after-tax rate of return on the taxable bond? (Round your answer to 2 decimal places. (e.g., 32.16))b. Which security bond should you buy?What is the solution? See the attached.A municipal bond carries a coupon rate of 4.25% and is trading at par. What would be the equivalent taxable yield of this bond to a taxpayer in a 35% combined tax bracket? (Round your answer to 2 decimal places.)
- A tax-free municipal bond provides a yield of 4.3%. What is the equivalent taxable bond given a 35% tax bracket? 4.3% 5.4% 6.6% 2.8%Short-term municipal bonds currently offer yields of 4%, while comparable taxable bonds pay 5%. Which gives you the higher after-tax yield if your tax bracket is:a. Zerob. 10%c. 20%d. 30%A bond issued by the State of Pennsylvania provides a 5.75% yield. What yield on a Synthetic Chemical Company bond would cause the two bonds to provide the same after-tax rate of return to an investor in the 35.00% tax bracket? (Round your final answer to two decimal places.) O a. 3.74% O b. 7.76% O c. 8.85% O d. 4.26% O e. 16.43%
- A municipal bond you are considering as an investment currently pays a yield of 6.76 percent. a. Calculate the tax equivalent yield if your marginal tax rate is 28 percent.b. Calculate the tax equivalent yield if your marginal tax rate is 21 percent.If a 5 yr. AA- General Dynamics note is yielding a 35% tax bracket investor 7.56125% while a comparable maturity note from Philadelphia, Pennsylvania is yielding 4.8735%. If the inflation rate is 2.2765%, which bond would the investor prefer and why? If the marginal tax rate for the investor increases to 38.95%, which bond would the investor prefer? What is the critical tax rate?A 10-year corporate bond has an annual coupon of 9 percent ($45 paid semi-annually) and a price of $1,033.24, while a 10-year municipal bond has an annual coupon of 5 percent ($25 paid semi-annually) and a price of $925.61. Given this information, determine what your tax rate must be so that both of these bonds have the same after-tax yield. O 30.23% O 29.41% O 27.71% O 26.83% O 28.57%
- A 10-year corporate bond has an annual coupon of 9 percent ($45 paid semi-annually) and a price of $1,026.47, while a 10-year municipal bond has an annual coupon of 5 percent ($25 paid semi- annually) and a price of $925.61. Given this information, determine what your tax rate must be so that both of these bonds have the same after-tax yield. 28.57% O 27.71% 29.41% 26.83% O 30.23%What is the tax exempt equivalent yield on a 8% bond yield given a marginal tax rate of 25%? Mutiple Choice O O 6.00% 10.67% ROO% 6.40%If a 5 year annual bond with a 6% coupon rate, currently priced at $988 and par value is $1000, what is the cost of debt before tax? For the question above, if the tax rate is 30%, how much is the after tax cost of debt?