ESSENTIALS OF INVESTMENTS SELECT CHAPT
17th Edition
ISBN: 9781307126228
Author: Bodie
Publisher: MCG/CREATE
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Textbook Question
Chapter 2, Problem 6PS
Why are high−tax−bracket investors more inclined to invest in municipal bonds than are low-bracket investors? (LO 2-1)
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H5.
1. If you are the firm, which instrument would you prefer between bond vs sukuk to finance you business? Why?
2. If you are the investor, which instrument would you prefer between bond vs sukuk for investment purpose? Why?
In regards to considering investment, if an investor is of a high income bracket, what kind of bond would he/she almost always be better off investing in?
investment, treasury, corporate, or tax-free municipal bond?
3. If you were an investment advisor, which bonds you would recommend to invest and why? Justify your answer.
Chapter 2 Solutions
ESSENTIALS OF INVESTMENTS SELECT CHAPT
Ch. 2 - Prob. 1PSCh. 2 - Why do most professionals consider the Wilshire...Ch. 2 - Prob. 3PSCh. 2 - What are the major components of the money market?...Ch. 2 - Describe alternative ways that an investor may add...Ch. 2 - Why are hightaxbracket investors more inclined to...Ch. 2 - Prob. 7PSCh. 2 - How does a municipal revenue bond differ from a...Ch. 2 - Prob. 9PSCh. 2 - 10. What is meant by limited liability? (LO 2-1)
Ch. 2 - Which of the following correctly describes a...Ch. 2 - Why are money market securities sometimes referred...Ch. 2 - A municipal bond carries a coupon rate of 4.25%...Ch. 2 - Suppose that short-term municipal bonds currently...Ch. 2 - An investor is in a 30% combined federal plus...Ch. 2 - Find the equivalent taxable yield of the municipal...Ch. 2 - Prob. 17PSCh. 2 - Prob. 18PSCh. 2 - Prob. 19PSCh. 2 - Using the data in the previous problem, calculate...Ch. 2 - Prob. 21PSCh. 2 - Prob. 22PSCh. 2 - A T-hill with face value $10.000 and 87 days to...Ch. 2 - Prob. 24PSCh. 2 - Prob. 25PSCh. 2 - What options position is associated with: (LO 2-3)...Ch. 2 - Why do call options with exercise prices higher...Ch. 2 - Both a call and a put currently are traded on...Ch. 2 - Prob. 30PSCh. 2 - Examine the stocks listed in Figure 2.8. For what...Ch. 2 - Find the after-tax return lo a corporation that...Ch. 2 - Prob. 33CCh. 2 - Prob. 34CCh. 2 - Prob. 1CPCh. 2 - Go to the website for The Walt Disney Co (DIS) and...Ch. 2 - Prob. 2WM
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- Why are government bonds considered safer to invest in as compared to corporate bonds?arrow_forwardWhat are municipal bonds? What characteristics makes them especially attractive to high-income investors? What kinds of expenses do mutual funds incur? How are expense ratios calculated?arrow_forwardThink from the borrower (management) and NOT lender (investor) points of view. Which is the less risky financial instrument? O bond financing O stock financing O bank loans venture capital fundingarrow_forward
- 1. How would you define corporatebonds? Explain in your own wordswhat Bonds issued at Par, at aDiscount, and at a Premium are.2. How would you explain thedifference between bank loans andissuing corporate bonds? In youropinion, which of the fundingmethods is more attractive to acompany?arrow_forwardThese are corporate bonds that have a higher rate of return with a higher level of risk? Group of answer choices Revenue bonds Junk bonds GOBs Tax increment bondsarrow_forward1. What are the more recently issued (and more frequently traded) bonds called? Why do investors favor these securities?arrow_forward
- Which of the following investment has the lowest risks and lowest returns! EE savings bonds. Money market savings accounts. Real estate. Exchange-traded funds.arrow_forwardV6. Does net debt ratio provide useful information to the investor? Are the NonGAAP measures, ROCE and ROSE, useful and relevant?arrow_forward2. Which of the following is a reason why zero-coupon bonds are the best way for high-income taxpayers to extract maximum value from tax-exempt state and local government bonds? a.The investments pay interest continually. b.The interest earned on the accumulated principal and interest is not tax-exempt. c.Zero-coupon bonds are high-risk, high-reward bonds. d.Zero-coupon bonds include more transaction fees. e.Zero-coupon bonds allow the investor to make additional tax-exempt investments.arrow_forward
- Risk-based capital rules cause banks to favor:A. government bondsB. revenue bondsC. all municipal bondsD. no municipal bondsarrow_forward1. State 2 reasons why Net Present Value is a better decision criteria compared to other alternatives. 2. Why might a company prefer to issue secured bonds rather than unsecured bonds?arrow_forwardExplain the difference between owning a bönd vs owning a stock? What are the advantages and disadvantages owning these two financial instruments?arrow_forward
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