Assume that an individual owns a bond that they purchased for $100,000. The bond has a 10% coupon. The bond will mature in three years and is currently selling for $125,000. What tax planning technique can the investor utilize?
Q: An investor recently purchased a corporate bond that yields 9%. The investor is in the 36% combined…
A: Before tax yield = 9.00% Tax rate = 36% After Tax yield = Before tax yield * (1- Tax rate)
Q: Assume an individual makes a lump sum investment at the beginning of year one of $38,420, the…
A: Future value is that amount which will be required to paid at some specified period of time. It…
Q: Curtis invests $250,000 in a city of Athens bond that pays 7 percent interest. Alternatively, Curtis…
A: The objective of this question is to calculate the after-tax rate of return on the city of Athens…
Q: You purchase a REIT for $50. It distributes $3 consisting of $1 in income, $0.50 in long-term…
A: Short-term capital gain tax and long-term capital gain tax are two types of direct tax which is…
Q: Assume that you purchased a $10,000 corporate bond. The interest rate is 7.00 percent. What is the…
A: Bond purchased amount (FV) = $10,000Interest rate = 7.00%
Q: An investor purchases a 30-year U.S. government bond for $1,020. The bond's coupon rate is 9…
A: Given information: Present value of bond is $1,020 Par value of bond is $1,000 Coupon rate is 9%…
Q: 129,000 annual income. Your company matches 75 percent of the first 10 percent of your earnings. You…
A: 401(K) is one of the profit sharing plan in which there is contribution from employee and also…
Q: A man bought a 5% tax-free municipal bond. It cost $1000 and will pay $50 interest each year for 20…
A: The real rate is the interest rate which removes the effect of inflation to compute the real cost of…
Q: What is the investment objective for a client who is 57 years old and planning to retire in 5 years?…
A: “Since you have asked multiple questions, we will solve the first question for you. If you want any…
Q: An investor purchases a 30-year U.S. municipal bond for $840. The bond’s coupon rate is 10 percent…
A: We know all the cash flows associated with the bond along with the timing. We need to find the…
Q: Suppose you are a manager for a certain company. You earn $50,000 per year and are in the 28%…
A: As per IRS guidelines, federal income tax is applicable to individuals, corporations, trusts, and…
Q: Mildred can purchase a municipal bond with a par (face) value of $1000 that will mature in 10 years.…
A: A financial instrument with a fixed cost that helps a company to raise funds for business operations…
Q: You have $10,000 cash that you want to invest. Normally, you would deposit the money in a savings…
A: Given information: Municipal bond pays interest of 9% annually. Corporate bond pay interest of 12%…
Q: bond
A: 1) To calculate which bond is more beneficial we have to calculate the YTM. Formula for YTM is: YTM…
Q: A corporation issues a bond that promises to pay you monthly coupons in the amount of $ 77.5 per…
A: Bond price refers to the market value at which a bond is traded. It represents the present value of…
Q: what is the equIvalent yield on the taxable bond?
A: Tax Equivalent Yield: It is the return needed for a taxable bond to equal the yield of the…
Q: Suppose you are a manager for a certain company. You earn $50,000 per year and are in the 28%…
A: Tax savings is the reduction in the amount of income tax that an individual or entity is required to…
Q: company sponsors a 401(k) plan into which you deposit 10 percer nt of percent of the first 10…
A: 401(K) is one of the profit sharing plan in which there is contribution from employee and also…
Q: Suppose you are a manager for a certain company. You earn $50,000 per year and are in the 28%…
A: A drop in the level of tax paid by a citizen, corporation, or other taxpayer is alluded to as a tax…
Q: Suppose you are a manager for a certain company. You earn $50,000 per year and are in the 28%…
A: (a) How much tax do you save (in $) each year by making the retirement fund contributions?The tax…
Q: What is Curtis's after-tax rate of return on the city of Athens bond?
A: The correct answer is 9.25 percent.
Q: Y
A: The percentage total return shows the total return in percentage terms. The total return is…
Q: You are considering the tax consequences of investing $2,000 at the end of each year for 30 years in…
A: For calculation of accumulated value after 30 years , we will use formula of future value of annuity…
Q: How much tax do you save (in $) each year by making the retirement fund contributions? $ (b) Using…
A: Tax savings amount is the amount which has been saved by the taxpayer by making such types of…
Q: Suppose you are a manager for a certain company. You earn $50,000 per year and are in the 28%…
A: Future value of annuity = annuity * Table factor (r, n) Tax savings = Investment in IRA * marginal…
Q: Your company sponsors a 401(k) plan into which you deposit 10 percent of your $120,000 annual…
A: 401(K) is one of the profit sharing plans in which there is a contribution from employee and also…
Q: A taxpayer can invest $10,000 in a taxable 10-year bond that yields an annual pretax return of 6…
A:
Q: Answer each of the following independent questions. Ignore personal income taxes. Use Appendix A for…
A: According to bartleby guidelines , if multiple questions are asked , then 1st question needs to be…
Q: An investor purchases one municipal bond and one corporate bond that pay rates of return of 9% and…
A: Given Tax rate =20% Return on municipal bond =9% Return on corporate bond = 10.5%
Q: An investor is comparing the following two bonds: a bond from ABC Corp which pays an interest rate…
A: Taxation-Taxation means imposing a tax on individuals and different types of organizations. Which…
Q: Suppose your company needs to raise $36.9 million and you want to issue 24-year bonds for this…
A: Coupon Bond cash outflow = Amount Rate (1-Tax rate).= −36,900,000∗9.4%∗(1−0.35)=−2,254,590
Q: 2) Consider the decision to purchase either a 7-year c corporate bond is a 14% annual coupon bond…
A: Bonds are priced by discounting future cash flows. Future cash flows include coupons and par value…
Q: What are the After-tax annualized returns from the following two funds if you invest $1000 in each…
A: Compounding is a technique through which future value of present amount is calculated at fixed rate…
Assume that an individual owns a bond that they purchased for $100,000. The bond has a 10% coupon. The bond will mature in three years and is currently selling for $125,000. What tax planning technique can the investor utilize?
Trending now
This is a popular solution!
Step by step
Solved in 2 steps
- An investor purchases one municipal bond and one corporate bond that pay rates of return of 9% and 10.5%, respectively. If the investor is in the 20% tax bracket, his after-tax rates of return on the municipal and corporate bonds would be, respectively, _____.Suppose your marginal federal income tax rate is 25 percent. 1. What is your after-tax return from holding a one-year corporate bond with a yield of 5.25 percent? (1 pt) 2. What is your after-tax return from a holding a one-year municipal bond with a yield of 4 percent? (1 pt) 3. How would you decide which bond to hold? (Assume that Both bonds carry the same risk.) (1 pt)Please solve
- Curtis invests $250,000 in a city of Athens bond that pays 7 percent interest. Alternatively, Curtis could have invested the $250,000 in a bond recently issued by Initech, Incorporated that pays 9 percent interest with similar risk as the city of Athens bond. Assume that Curtis's marginal tax rate is 24 percent. What is Curtis's after-tax rate of return on the city of Athens bond?Suppose you invest in a municipal bond that pays a yield of 9%. If your marginal tax is 29%, what is the equivalent yield on the taxable bond? (write your answer in percentage and round it to 2 decimal places)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?
- Assume your in the 28% tax bracket and purchase a municipal bond with yield of 3.10%. What is the taxable equivalent yield for this investment?Prepare a schedule for the following bond, including calculations, yearly income, end-of-year accumulations, and net of tax: You purchase a one-year municipal bond for $150,000. Every year on December 30, the muni bond will mature and pay interest, and on that date, you will put the income, net of any taxes due, in a bank CD and utilize the principle to purchase another one-year muni-bond. The CD also has a maturity of one year, and you'll reinvest the principle and any CD income, net of any tax he owes, together with the muni revenue, in another CD, and so on. When the last muni and CD mature at the end of year three, you will keep the CD and muni amounts as of that time, net of any taxes due, to support your children's education. (you invest on Jan 1 on the first year, and cash out on December 31 on the last year). You are, and will stay, in the 40% ordinary income and 20% long-term capital gains tax rates. The muni-bond has a rate of return of 4%, whereas a CD has a rate of return…You are considering investing in a bond that matures 20 years from now (the par value of the bond is $1,000). It pays an annual end-of-year coupon rate of interest of 7.25 percent, or $72.5 per year. The bond currently sells for $900. Your marginal income tax rate (applied to interest payments) is 28 percent. Capital gains are taxed at the same rate as ordinary income. What is your after-tax rate of return if you buy this bond today and hold it until maturity? Use Table II and Table IV or a financial calculator to answer the question. Round your answer to the nearest whole number.
- An investor is trying to decide between a muni paying 6.20 percent or an equivalent taxable corporate paying 8.25 percent. What is the minimum marginal tax rate the investor must have to consider buying the municipal bond? 20.0 percent 66.7 percent 80.0 percent 25.0 percent 75.0 percentyou invest in a municipal bond that pays a yield of 10%. If your marginal tax is 26%, what is the equIvalent yield on the taxable bond? (write your answer in percentage and round it to 2 decimal places)If a taxpayer's marginal tax rate is 33 percent, what is the after-tax yield on a corporate bond that pays 5 percent interest? If the average marginal tax rate of all taxpayers is 50 per- cent, will the taxpayer with the 33 percent marginal tax rate prefer a corporate or a mu- nicipal security? Assume equivalent safety and maturity.