**Bond Pricing and Yield Analysis**This spreadsheet image focuses on bond pricing and yield analysis, comparing a municipal bond to a treasury bond.### Key Components:1. **Treasury Bond Details:** - **Price:** $1150 - **Coupon Rate:** 6% (paid semi-annually) - **Face Value:** $1000 - **Maturity:** 5 years - **Yield to Maturity (YTM):** 2.767%2. **Municipal Bond (Muni Bond) Details:** - **Coupon Rate:** 5% (paid semi-annually) - **Face Value:** $1000 - **Maturity:** 5 years### Core Questions:3. **Objective:** - Determine the price at which the municipal bond should trade to have a YTM that is 70 basis points above the treasury bond of the same maturity. - Assumes a 35% tax rate. - Instructions to show calculations are provided.4. **Indifference Calculation:** - A query related to the tax rate at which an investor would be indifferent between the two bonds, assuming the municipal bond is insured against default. - Instructions to show calculations are provided for this scenario.### Additional Notes:- The spreadsheet highlights sections in color for emphasis, particularly focusing on differential calculations between the two bond types.- Users are directed to view calculations to determine specific trade prices and tax rate indifferences.This educational setup is ideal for understanding bond pricing mechanisms, tax impacts, and yield comparisons.

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Description: **Bond Pricing and Yield Analysis**This spreadsheet image focuses on bond pricing and yield analysis, comparing a municipal bond to a treasury bond.### Key Components:1. **Treasury Bond Details:** - **Price:** $1150 - **Coupon Rate:** 6% (paid s

Given: Muni Bond Treasury bond Price $1,069.28 Price 1150 Coupon rate 5% Coupon rate 6%…

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Ler Tax Y What price should the municiple bond trade at in order to have a YTM 70 basis points above the treasury bond of the same maturity. Assume a 35% tax rate now your calculations Muni Bond Price 5 Coupon rate (paid annually ) Face value 26 27 YTM 28 Diff 29 Maturity Treasury Bond Price Coupon rate (paid semi annually 5%) 1000 Face value 5 Maturity 1150 6% 1000 5 2.767% Treasury + 70bps spread

Ler Tax Y What price should the municiple bond trade at in order to have a YTM 70 basis points above the treasury bond of the same maturity. Assume a 35% tax rate now your calculations Muni Bond Price 5 Coupon rate (paid annually ) Face value 26 27 YTM 28 Diff 29 Maturity Treasury Bond Price Coupon rate (paid semi annually 5%) 1000 Face value 5 Maturity 1150 6% 1000 5 2.767% Treasury + 70bps spread

Excel Applications for Accounting Principles

4th Edition

ISBN:9781111581565

Author:Gaylord N. Smith

Publisher:Gaylord N. Smith

Chapter11: Bond Pricing And Amortization (bonds)

Section: Chapter Questions

Problem 8R: a. Reset the Data Section to its initial values. The price of this bond is 1,407,831. What would it...

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Concept explainers

Financial Ratios

A Ratio refers to a figure calculated as a reference to the relationship of two or more numbers and can be expressed as a fraction, proportion, percentage, or the number of times. When the number is determined by taking two accounting numbers derived from the financial statements, it is termed as the accounting ratio.

Return on Equity

The Return on Equity (RoE) is a measure of the profitability of a business concerning the funds by its stockholders/shareholders. ROE is a metric used generally to determine how well the company utilizes its funds provided by the equity shareholders.

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**Bond Pricing and Yield Analysis**

This spreadsheet image focuses on bond pricing and yield analysis, comparing a municipal bond to a treasury bond.

### Key Components:

1. **Treasury Bond Details:**
- **Price:** $1150
- **Coupon Rate:** 6% (paid semi-annually)
- **Face Value:** $1000
- **Maturity:** 5 years
- **Yield to Maturity (YTM):** 2.767%

2. **Municipal Bond (Muni Bond) Details:**
- **Coupon Rate:** 5% (paid semi-annually)
- **Face Value:** $1000
- **Maturity:** 5 years

### Core Questions:

3. **Objective:**
- Determine the price at which the municipal bond should trade to have a YTM that is 70 basis points above the treasury bond of the same maturity.
- Assumes a 35% tax rate.
- Instructions to show calculations are provided.

4. **Indifference Calculation:**
- A query related to the tax rate at which an investor would be indifferent between the two bonds, assuming the municipal bond is insured against default.
- Instructions to show calculations are provided for this scenario.

### Additional Notes:
- The spreadsheet highlights sections in color for emphasis, particularly focusing on differential calculations between the two bond types.
- Users are directed to view calculations to determine specific trade prices and tax rate indifferences.

This educational setup is ideal for understanding bond pricing mechanisms, tax impacts, and yield comparisons.

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