8910111213141516171819YTMTEYFace valuMaturityYTMTEYAfter Tax Y2. Which bond would an investor with in the 28% tax bracket prefer, assuming the municiple bond is insured against default?Show your calculations and explain.Muni BondPriceCouponrate(paidsemiannually+ESheet1OphpYfZe9p.pnge Type here to searchTreasury Bond101 PriceCouponrate(paidsemiannually2%100 Face value10 Maturity)image.png102TEY1001010ETEYMZW*****SSURGX

As per the given information: Municipal bond Treasury bondPrice 101…

9 10 11 12 13 14 15 16 17 18 19 nn Coupon rate (paid semi annually 2. Which bond would an investor with in the 28% tax bracket prefer, assuming the municiple bond is insured against default? Show your calculations and explain. Muni Bond Price () Face value Maturity YTM TEY After Tax Y Treasury Bond 101 Price Coupon rate (paid semi annually 2%) 100 Face value 10 Maturity 102 TEY 3% 100 10 TEY

9 10 11 12 13 14 15 16 17 18 19 nn Coupon rate (paid semi annually 2. Which bond would an investor with in the 28% tax bracket prefer, assuming the municiple bond is insured against default? Show your calculations and explain. Muni Bond Price () Face value Maturity YTM TEY After Tax Y Treasury Bond 101 Price Coupon rate (paid semi annually 2%) 100 Face value 10 Maturity 102 TEY 3% 100 10 TEY

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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Similar questions

If a 5 yr. AA- General Dynamics note is yielding a 35% tax bracket investor 7.56125% while a comparable maturity note from Philadelphia, Pennsylvania is yielding 4.8735%. If the inflation rate is 2.2765%, which bond would the investor prefer and why? If the marginal tax rate for the investor increases to 38.95%, which bond would the investor prefer? What is the critical tax rate?
The coupon rate on a tax-exempt bond is 5.6%, and the rate on a taxable bond is 8%. Both bonds sell at par. At what tax bracket (marginal tax rate) would an investor be indifferent between the two bonds?
Assume the following Risk Premiums: DRP ? LP = 0.25% MRP =1.15% 10-year Government bonds yield 4.65% 10-year corporate bonds yield 6.75%. What is the default risk premium on corporate bonds?
Assume you have treasury note .The contract price is 124 and you can deliver either bond A with conversion of 0.9 and price of 110 or a bond with conversion of 0.7 and price is 100. What will be the loss gain of the buyer? ( 1.77 -1.77 9.3 -9.3
Municipal bond offers YTM 5.7%, where as corporate bond offers 5% yield. both has the same maturity. for which values of marginal tax rate would an investor prefer to buy the corporate bond? A) -25% B) -19% C) -15% D) -14%
Bonds with a face value of $336000 and a quoted price of 98.5 have a selling price of $329297. $329448. $330960. $330120.
If a P1,000 bond sells for P1,125, which of the following statements are correct? I. The market rate of interest is greater than the coupon rate on the bond. II. The coupon rate on the bond is greater than the market rate of interest. III. The coupon rate and the market rate are equal. IV. The bond sells at a premium. V. The bond sells at a discount. a. I and IV b. I and V c. II and IV d. II and V
Problem5: OnJanuary1,2021,BLITZENCompanyissued10%bondsdatedJanuary1,2021withafaceamountof ₱8,000,000.ThebondsmatureonDecember31,2026.Forbondsofsimilarriskandmaturity,the marketyieldis14%.Interestispaidsemi-annuallyonJune30andDecember31.(Useatmost,4decimal placesforPVfactors) Preparethejournalentriesfor2021 Computeorprovidetheanswersforthefollowing: DeterminethepriceofthebondsonJanuary1,2021. Howmuchistheinterestexpensefortheyearended,December31,2021? Howmuchistheinterestexpensefortheyearended,December31,2022? WhatisthecarryingamountofthebondsonDecember31,2022?
Municipal bonds are yielding 4.4 percent if they are insured and 4.7 percent if they are uninsured. Your marginal tax rate is 28 percent and the inflation rate is 1.645%. Your equivalent taxable yield on the insured bonds is _____ percent and on the uninsured bonds is _____ percent. How would your answers change if your marginal tax rate falls to 13.5% and the inflation rate increases to 2.0639%? What would happen to the YTM of the uninsured bond if negative news was announced resulting in a decline in its credit rating? What would happen to the YTM of the insured bond if it suddenly lost its insurance?
What is the default risk premium on Aaa corporate bond, if the interest rate on that bond is 3.25 percent and the interest rate on a Treasury security is 1.16 percent?
A corporate issue will be brought to the market at aspread of T+ 68bp. Explain what this means andassuminga treasury yield of 1.50% what would be theinitial yield of this bond? Why are Treasuries seen assuitable benchmarks for pricing corporate bonds?
What is the yield to maturity on Fox Inc.'s bonds if its after-tax cost of debt is 9% and its tax rate is 34%? 9% 13.64% 26.47% 5.94%

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