In order for you to be indifferent between the after tax returns on a corporate bond...
In order for you to be indifferent between the after tax returns on a corporate bond paying 8.0% and a tax-exempt municipal bond paying 6.0%, what would your tax bracket need to be?
A. 25%
B. 75%
C. 28%
D. 15%
E. Cannot tell from the information given
Homework Answers
Return on corporate bond *(1-tax rate)=municipal bond yield
8*(1-tax rate)=6
1-tax rate=(6/8)
tax rate=1-(6/8)
which is equal to
=25%
Add Answer to:
In order for you to be indifferent between the after tax returns
on a corporate bond...
An investor is indifferent between holding a corporate bond with a before-tax yield of 6.61% and...
An investor is indifferent between holding a corporate bond with a before-tax yield of 6.61% and a tax-exempt municipal bond with a yield of 4.51%. What is the marginal tax rate of the investor, in %, to the nearest 0.1%? E.g., if your answer is 27.13%, enter it as 27.1.
You currently own a corporate bond issued by Goldman Sachs that yields 8.0%. What would a...
You currently own a corporate bond issued by Goldman Sachs that yields 8.0%. What would a tax-exempt bond with similar risk have to yield for you to be indifferent between municipal bond and the Goldman bond if your marginal tax rate is 25%?
Calculate the after-tax return of a 8.15 percent, 20-year, A-rated corporate bond for an investor in...
Calculate the after-tax return of a 8.15 percent, 20-year, A-rated corporate bond for an investor in the 10 percent marginal tax bracket. Compare this yield to a 7.16 percent, 20-year, A-rated, tax-exempt municipal bond and explain which alternative is better. Repeat the calculations and comparison for an investor in the 33 percent marginal tax bracket. The after-tax return of a 8.15 percent, 20-year, A-rated corporate bond for an investor in the 10 percent marginal tax bracket is 7.34 %. (Round...
question 2. Calculate the after tax return of a 9.17 percent, 20 year, A-rated corporate bond...
question 2. Calculate the after tax return of a 9.17 percent, 20 year, A-rated corporate bond for an investor in the blank percent marginal tax bracket. Compare this yield to a 7.96percent, 20 year, A rated, tax exempt municipal bond and explain which alternative is better. Repeat the calculations and comparison for an investor in the 33percent marginal tax bracket. The after tax return of a 9.17 percent, 20 year, A-rated corporate bond for an investor in the 15 percent...
Calculate the after-tax return of a 6.35 percent, 20-year, A-rated corporate bond for an investor in...
Calculate the after-tax return of a 6.35 percent, 20-year, A-rated corporate bond for an investor in the 10 percent marginal tax bracket. Compare this yield to a 4.85 percent, 20-year, A-rated, tax-exempt municipal bond and explain which alternative is better. Repeat the calculations and comparison for an investor in the 35 percent marginal tax bracket.
A corporate bond has a yield of 8.0 percent and a municipal bond has a yield...
A corporate bond has a yield of 8.0 percent and a municipal bond has a yield of 6.5 percent. Which bond do you prefer if you are in the 25 percent tax bracket? A.Muni Bond B.Corporate Bond C.There is no difference between the bonds. Either bond offers the same after tax yield for the investor.
Based on the after-tax returns, at what federal tax rate is an investor better off choosing...
Based on the after-tax returns, at what federal tax rate is an investor better off choosing a tax-exempt 6.75 percent municipal bond over a taxable 9.78 percent corporate bond? The after-tax return on the corporate bond when the tax rate is 10% is ?
A corporate bond has a yield of 3.91%. What should be the yield on a tax-exempt...
A corporate bond has a yield of 3.91%. What should be the yield on a tax-exempt municipal bond (in %, to the nearest 0.01%) to make an investor with the 33% marginal tax rate indifferent between the two bonds? E.g., if your answer is 3.237%, record it as 3.24.
Karen is a wealthy retired investment advisor who is in the 35 percent tax bracket. She...
Karen is a wealthy retired investment advisor who is in the 35 percent tax bracket. She has a choice between investing in a high-quality municipal bond paying 5 percent or a high-quality corporate bond paying 7 percent. a. What is the after-tax return of each bond? Enter your answer as a percent, rounded to two decimal places. Tax-exempt municipal bond: _______% Corporate bond:_________ %
A municipal bond has yield to maturity of 5.08 percent. A comparable corporate bond has yield...
A municipal bond has yield to maturity of 5.08 percent. A comparable corporate bond has yield to maturity of 7.24 percent. Which of these two bonds should an investor with a marginal tax rate of 28 percent buy? A. The corporate bond because it offers a higher after-tax yield to maturity. B. The corporate bond because its stated yield to maturity of 7.24 percent is higher than the municipal bond's stated yield to maturity of 5.08 percent. CC. The municipal...
Calculate the after-tax return of a 8.15 percent, 20-year, A-rated corporate bond for an investor in the 10 percent marginal tax bracket. Compare this yield to a 7.16 percent, 20-year, A-rated, tax-exempt municipal bond and explain which alternative is better. Repeat the calculations and comparison for an investor in the 33 percent marginal tax bracket. The after-tax return of a 8.15 percent, 20-year, A-rated corporate bond for an investor in the 10 percent marginal tax bracket is 7.34 %. (Round...
A municipal bond has yield to maturity of 5.08 percent. A comparable corporate bond has yield to maturity of 7.24 percent. Which of these two bonds should an investor with a marginal tax rate of 28 percent buy? A. The corporate bond because it offers a higher after-tax yield to maturity. B. The corporate bond because its stated yield to maturity of 7.24 percent is higher than the municipal bond's stated yield to maturity of 5.08 percent. CC. The municipal...
Most questions answered within 3 hours.
-
Where is the error in this code sequence?
String s1 = "Hello";
String s2 = "ello";...
asked 10 months ago -
Financial data for Joel de Paris, Inc., for last year
follow:
Joel de Paris, Inc.
Balance...
asked 10 months ago -
Consider this reaction:
Al2(SO4)3 (aq)+ BaCl3
(aq) Al2Cl6 (aq)- +
3BaSO4(s) . What is the...
asked 10 months ago -
Suppose that Savneet is considering increasing her
recent random sample from 20 car rentals to 40...
asked 10 months ago -
Trucks arrive at an unloading terminal at an average rate of 120
per hour.
Trucks arrive...
asked 10 months ago -
Why are methanol and ethanol completely soluble in water while
octanol is not very little soluble....
asked 10 months ago -
A facilities manager at a university reads in a research report
that the mean amount of...
asked 10 months ago -
When the CuSO4 is rehydrated by adding water to the anhydrous
compound, is this an endothermic...
asked 10 months ago -
A ray of sunlight is passing from diamond into crown glass; the
angle of incidence is...
asked 10 months ago -
A block of mass 0.249 kg is placed on top of a light, vertical
spring of...
asked 10 months ago -
how do the kidneys compensate in the presences of acidosis
a) trigger hyperventilate
b) reserve acid...
asked 10 months ago -
Question 501 pts
The rental rate of capital to the firm increases. Which of the
following...
asked 10 months ago