You live in a world with a flat 21% taxes on all income except for the interest on municipal bonds. You areconsidering the purchase of a taxable corporate bond. You have identified a municipal bond with similartime-to-maturity, liquidity and default concerns, which bears a yield of 3.38%. Based on these figures,estimate what yield the taxable corporate bond should bear.5.23%4.28%4.83%2.67%

Municipal bond is issued by government and these bonds are risk free and tax exempted and used by government for raising money from market.Equivalent rate on corporate bond=Equivalent yield on taxable corporate bond=4.28%Option 2 is correctEquivalent yield on taxable corporate bond=4.28%Option 2 is correct

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You live in a world with a flat 21% taxes on all income except for the interest on municip considering the purchase of a taxable corporate bond. You have identified a municipal b time-to-maturity, liquidity and default concerns, which bears a yield of 3.38%. Based on estimate what yield the taxable corporate bond should bear. 5.23% 4.28% 4.83%

You live in a world with a flat 21% taxes on all income except for the interest on municip considering the purchase of a taxable corporate bond. You have identified a municipal b time-to-maturity, liquidity and default concerns, which bears a yield of 3.38%. Based on estimate what yield the taxable corporate bond should bear. 5.23% 4.28% 4.83%

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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Ying Import has several bond issues outstanding, each making semiannual interest payments. The bonds are listed in the table bel If the corporate tax rate is 22 percent, what is the aftertax cost of the company's debt? Note: Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16. Aftertax cost of debt
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Zero coupon bonds: O a. create annual taxable income to individual bondholders. O b. create a tax deduction for the issuer only at maturity. O care issued only by the U.S. Treasury. O d. are issued at a premium. O e. are valued using simple interest.
A U.S. Treasury bond pays 7.6 percent interest. You are in the 22 percent tax bracket. 5.93 is the after tax-yield on this bond. If you face a 22% marginal tax rate, what is your after-tax return on each of the following bonds? A 8.6% coupon semiannual corporate bond with 7 years to maturity, currently selling for $950. Don't round steps. 2 decimal answer. _% A 5.8% coupon semiannual corporate bond with 6 years to maturity, currently selling for $1,015. Don't round steps, 2 decimal answer. _% A 4.8% coupon semiannual municipal bond with 11 years to maturity, currently selling for $1,016. Don't round steps. 2 decimal answer. _%
Ying Import has several bond issues outstanding, each making semiannual interest payments. The bonds are listed in the table below. Coupon Rate Maturity Face Value $ 8.90% Bond 1 2 3 6.80 8.60 9.20 Aftertax cost of debt Price Quote 106.8 93.4 105.8 96.5 % 4 years 6 years 14.5 years 25 years If the corporate tax rate is 25 percent, what is the aftertax cost of the company's debt? Note: Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16. 28,000,000 31,000,000 36,000,000 55,000,000
Ying Import has several bond issues outstanding, each making semiannual interest payments. The bonds are listed in the following table. Bond 1 2 3 4 Coupon Rate Price Quote 5.1% 6.7 Cost of debt 6.6 5.9 104.86 113.62 112.17 101.41 Maturity 5 years 8 years 15.5 years 25 years % Face Value $ If the corporate tax rate is 24 percent, what is the aftertax cost of the company's debt? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) 59,000,000 54,000,000 74,000,000 81,000,000
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%
Corporate bonds issued by Johnson Corporation yield 8% interest at this time. Equal risk municipal bonds yield 6%. At what tax rate would an investor be indifferent to buying one or the other?
a. An 8 ½%, 25-year, $1,000 bond is presently selling at a yield-to-maturity (YTM) of 9 4%. Assuming annual interest payments, what should you pay for the bond? b. What should you pay if interest is paid semiannually? c. Instead of a 25-year bond, they decide to issue 15-year bonds with annual payments. What should you pay for this bond if the YTM is 9 4%? Explain the differences in prices changes for (3a) and (3c) in terms of maturity. d. You buy an 8%, 15-year, $1,000 bond that pays interest annually when it is selling with a YTM of 7%. Immediately after you buy the bond, the YTM increases to 9%. What was the percentage change in the price of the bond? A bond has a market price that exceeds its face value. What type of bond is this? Describe the relationship between the coupon rate and the YTM. е.
Ying Import has several bond issues outstanding, each making semiannual Interest payments. The bonds are listed in the following table. If the corporate tax rate is 31 percent, what is the aftertax cost of Ying's debt? (Do not round your intermediate calculations.) Bond Coupon Rate Price Quote 102 111 103 116 1234 4 6.3% 7 6.1 6.8 4.19% 5.78% 3.79% 3.83% 3.99% Maturity 7 years 12 years 21.5 years 32.5 years Face Value $ 21,000,000 40,000,000 47,000,000 58,000,000

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