A state issued muni bond offered at a coupon rate of 4% is preferred over a junk bond of 6% whena taxpayer's federal marginal tax bracket is 30% and their state is 5%. (The investor is a resident ofthe state the muni is issued in and is also exempt from state taxation.)TrueFalse

Municipal securities, sometimes known as "muni bond," are bonds issued by states, cities, counties,…

Answered: A state issued muni bond offered at a…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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A resident of New York is in the 32% federal tax bracket and the 6% state income tax bracket and is not subject to the federal 3.8% NIIT. Which of the following bonds would offer the resident the highest after-tax yield? 1. Treasury bond paying 4.7%. 2. Corporate bond paying 4.9%. 3. Louisiana Municipal bond paying 3.5%. O 1 only. O 2 only. O 3 only. O 1 and 3 are the same and have the highest after-tax yield.
Which of the following statements is/are CORRECT? O 1 Bonds sells well below par value when the yield to maturity is higher than its coupon rate. 2) Municipal bonds interests are tax-exempt at the federal level. 3) Most bonds are trading in the OTC market. O 4) All of the statements above are correct. 5) Statements a and c are correct.
Which of the following is FALSE regarding bonds? The yield to maturity is the return an investor would earn if she buys the bond at the current price and holds it to maturity, collecting all of the promised coupon payments and the par value at maturity bond holders vote to elect members to the board of directors a bond indenture includes all of the basic terms of a bond issue bondholders have legal recourse if a company fails to make the promised interest payments or the par value at maturity corporate bonds usually have a fixed coupon rate with semi-annual interest payments.
Statement 1: Bond issuers can take additional loans against the properties that were considered as collaterals for the bonds. Statement 2: Bond issuers can impose the taxes paid for registering the bonds against on the interest and principal claims of the bondholders. Statement 3: Bond issuers can prioritize other claims of other creditors over the bondholders in cases of bankruptcy. Statement 4: Bond issuers can pay dividends of shareholders even though the bondholders were not yet paid so long as the board of directors have decided on it. Statement 5: Bond issuers can take additional loans that would potentially compromise the ability of the issuer to keep its promise so long as other creditors permit it. a.All statements are true b.Statements 1, 2 and 4 are true c.Statements 2, 3 and 5 are trued.Statements 2, 4 and 5 are true e.Statements 3, 4 and 5 are true f. All statements are false
An investor in the 22 percent tax bracket is trying to decide which of two bonds to select: one is a 5.5 percent U.S. Treasury bond selling at par, the other is a municipal bond with a 4.25 percent coupon, which is also selling at par. Which of the two bonds hould the investor select? Why?
A company manufactures a type of product in three different production plants: P1, P2 and P3. Each of these production plants can produce up to 1570 units per month. The company supplies four customers who require each 1000, 1200, 1500 and 1000 units per month. The company makes a gross profit of R110/unit (excluding transport cost). The transportation rates (Rand/unit) from each production plant to each customer are displayed below: ETTTI Customer 3 25 Customer 1 Customer 2 Customer 4 Plant 1 30 10 20 30 15 Plant 2 15 25 10 Plant 3 20 30 20 A stockout rate of R12/unit applies for the short supply of products to the customers. Assist the company to find the shipment plan that will allow them to maximise profits.
What’s a muni bond, and how are these bonds taxed?
A6) The New South Wales State Government has been involved in issuing both social impact bonds and green bonds. Discuss the differences between these two bond types. Which type of bond do you think would provide better diversification benefits to an investor? Why?
In order to reduce inflation, the Federal reserve may choose to sell Treasury bonds in open market operations. Yes O No
46) Pete "Polar Bear" Alonso wants to purchase a bond with the highest tax-affect yield. He has a choice between a New York City municipal bond yielding 4.09% or a AAA-rated Coca Cola bond yielding 4.38%. His tax rate is 30%. Assuming the Polar Bear is a rational (and that is a stretch), which bond would be prefer? a) Neither, as he doesn't understand how to calculate tax-affected yields b) New York City bond c) Both, tax-affected yield is exactly the same d) Coca Cola e) His tax bracket is wrong
Problem 7-21 (Algorithmic) Foreign Tax Credit (LO 7.6) Martha and Lew are married taxpayers with $2,000 of foreign tax withholding from dividends in a mutual fund. They have enough foreign income from the mutual fund to claim the full $2,000 as a foreign tax credit. Their tax bracket is 28 percent and they itemize deductions. Should they claim the foreign tax credit or a deduction for foreign taxes on their Schedule A? If required, round your answer to the nearest dollar. The foreign tax deduction will result in a s tax benefit where as claiming the foreign tax credit yields a $ tax benefit. Therefore, the taxpayers should
The following entities issue bonds to engage in long-term borrowing EXCEPT: Multiple Choice O O the federal government. state and local governments. corporations. individuals.

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A state issued muni bond offered at a coupon rate of 4% is preferred over a junk bond of 6% when a taxpayer's federal marginal tax bracket is 30% and their state is 5%. (The investor is a resident of the state the muni is issued in and is also exempt from state taxation.) True False