An investor purchases one municipal and one corporate bond that pay rates of retum of 5.00% and6.40% respectively If the investor is in the 15% tax bracket, his after tax rates of return on the municipal and corporate bonds would be respectively

Q: The interest rate on a taxable bond is 4%. If your personal tax rate is 25%, what interest rate on a…

A: Interest rate on a taxable bond = 4% Personal tax rate = 25%

Q: A treasurer is deciding between a taxable security and a tax-exempt security.  The company's…

A: The taxable equivalent yield is the required return for an investor on order to equal the tax free…

Q: Suppose the state of Indiana issued a tax-exempt bond to pay for student fees in its universities.…

A: The tax-equivalent yield, also known as the After-tax yield, is used to establish if an investment…

Q: B. UNDERSTANDING: B.1 Direction: Solve and show your complete solution on the following problems.…

A: The income for bond investors comes in the form of coupon payments which remains constant over each…

Q: On January 1 of this year, Barnett Corporation sold bonds with a face value of $500,500 and a coupon…

A: The bonds are the debt instrument issued by the government entity or corporations. The bonds are…

Q: An investor recently purchased a corporate bond that yields 10%. The investor is in the 38% combined…

A: In the above question we need to calculate the bond's after tax yield from the details given.

Q: The Carey State Bank has purchased a bank-qualified municipal bond with a yield of 6%. This bank has…

A: The net after-tax return on the Carey State Bank's bank-qualified municipal bond can be calculated…

Q: 22. An investor in the 30% tax bracket is evaluating two bonds for investment: a corporate bond with…

A: 24The invoice price is the clean price plus the accrued interest.Accrued interest = (Coupon rate /…

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: You are in the 30% tax bracket (federal & state taxes combined). A corporate bond is yielding 9%.…

A: Municipal bonds are provided by the government and are tax free in nature and these are provided to…

Q: 00 for corporate bonds that have a par value of $10,000 and a coupon rate of 7.4 percent, payable…

A: Bonds are paid coupon interest payments each period and par value is paid on maturity of bond.

Q: If a taxpayer's marginal tax rate is 33 percent, what is the after-tax yield on a corporate bond…

A: Marginal tax rate = 33% Before tax interest on corporate bond = 5%

Q: An investor is trying to decide between a muni paying 6.20 percent or an equivalent taxable…

A: The objective of this question is to find out the minimum marginal tax rate at which an investor…

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: Frosty Corporation pays 11.6% interest on its outstanding bonds.  If its tax rate is 40%, what is…

A: When the corporation pays the interest on bonds, they are eligible to deduct this as an expense in…

Q: Justice Corporation has P5 million in outstanding 16 percent mortgage bonds. Additional bonds may be…

A: Current debt 5 million Interest @ 16% 0.8 million Let's put each of the conditions for the…

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: What’s the taxable equivalent yield on a municipal bond with a yield to maturity of 4.1 percent for…

A: The formula to compute equivalent taxable yield is as follows:

Q: Calculate the​ after-tax return of​ a(n) 5.625.62 ​percent, 20-year,​ A-rated corporate bond for an…

A: The objective of this question is to calculate the after-tax return of a corporate bond and a…

Q: If the municipal bond rate is 6% and the corporate bond rate is 8%, what is the marginal tax rate,…

A: The taxable equivalent yield is 8% in this scenario whereas tax free yield is 6%. We need to find…

Q: Curtis invests $450,000 in a city of Athens bond that pays 6 percent interest. Alternatively, Curtis…

A: The implicit tax equals the difference in pre-tax income earned from a similar (same risk) bond.How…

Q: Olivia Hawkins is evaluating a bond investment in Westlake Company. She is concerned about the…

A: Times interest earned ratio is calculated as Times interest earned = Earnings before interest and…

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: Assume your in the 35% tax bracket and purchased a municipal bond with a yield of 3.60. What is the…

A: Taxable equivalent yield is the return on taxable investment which is equal to the tax-exempt…

Q: 5) A 10-year municipal bond yields 4.8%. Your marginal tax rate (including state and federal taxes)…

A: After-tax return is the earnings on an investment or asset after accounting for taxes paid on those…

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: Harry Styles has the choice between investing in a City of San Diego bond at 3.00 percent or…

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

Q: Assume you are in the 35 percent tax bracket and purchase a municipal bond with a yield of 5.75…

A: Municipal bond yield = 5.75%tax rate = 35%Taxable equivalent yield =?

Q: An investor is in the 28% tax bracket. A corporate bond has a before-tax yield of 8%. What is the…

A: Given details are : Before tax yield = 8% Tax rate = 28% = 0.28 We need to compute the equivalent…

Q: Biogen is currently offering a bond with a coupon of 8.55%. The municipality of Boston is currently…

A: Bonds are debt instruments issued by companies or entities like a municipal body or a government…

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: How much explicit tax would Curtis incur on interest earned on the Initech, Incorporated bond? O…

A: A bond is a debt security issued by a company to raise finance for business operations.A bond holder…

Q: Calculate NPV using 10% discount rate. Year Cash Flow 0 1 -30,000 10,000 2 15,000 3 15,000

A: YearCash flow0-30,000110,000215,000315,000

Q: Assume that an individual owns a bond that they purchased for $100,000. The bond has a 10% coupon.…

A: Bonds- A bond is a fixed-income tool that represents a loan made by a shareholder to a borrower…

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: Assume a municipal bond has a yield of 5.75% and corporate bond of comparable maturity and credit…

A: After tax Yield on Municipal Bond = Before Tax Yield on Municipal Bond After tax Yield on Municipal…

Q: An investor is in the 28% federal tax bracket, pays an 9% state tax rate and 4% in local income…

A: Municipal bonds are tax-free bonds. issued by governments and the corporate bonds are issued by…

Q: Suppose the interest rate on a taxable corporate bond is 4 percent while a municipal, tax exempt…

A: Step 1 Bonds are used for borrowing money by the corporates or state governments or municipalities…

Q: The current yield on a municipal bons is 6%. What would the equivalent taxable yield of this bond…

A: Yield on municipal bond is tax free. But yield on corporate bond is taxable. Given: Yield on…

Q: An investor is trying to decide between a muni paying 6.20 percent or an equivalent taxable…

A: A municipal bond is a type of bond issued by a state or local government to finance public…

Q: tacey faces a 15% tax rate on interest income. She can buy a $100 face value corporate bond yielding…

A: Municipal bonds are issued by the local government corporation and interest on these bond is tax…

Q: Curtis invests $800,000 in a city of Athens bond that pays 5 percent interest. Alternatively, Curtis…

A: Assuming that the Initech bond is also taxable and subject to the same 24% marginal tax rate as the…

Q: Show the tax benefit (per dollar invested) that exists on a municipal bond with a yield of 8U basis…

A: The revenue that the government receives from taxes is used to finance public spendings, such as the…

Q: Harper is considering three alternative investments of $10,000. Assume that the taxpayer is in the…

A: Investment alternatives are the number of options available to the investor so that the individual…