An investor purchases one municipal and one corporate bond that pay rates of return of 7.2% and 9.1%, respectively. If the investor is in the 15% marginal tax bracket, his or her after-tax rates of return on the municipal and corporate bonds would be ________ and ______, respectively. A. 6.12%;7.735% B. 7.2%;7.735% C. 7.2%;9.1% D. 8.471%;9.1%

Q: An investor recently purchased a corporate bond that yields 9%. The investor is in the 36% combined…

A: Before tax yield = 9.00%  Tax rate = 36% After Tax yield = Before tax yield * (1- Tax rate)

Q: Assume that Keisha's marginal tax rate is 37 percent and her tax rate on dividends is 25 percent. If…

A: Dividend yield ×  ( 1 - Tax rate  ). =  Interest

Q: Suppose the state of Indiana issued a tax-exempt bond to pay for student fees in its universities.…

A: The tax-equivalent yield, also known as the After-tax yield, is used to establish if an investment…

Q: Suppose that JB Cos. has a capital structure of 78 percent equity, 22 percent debt, and that its…

A: WACC refers to a firm's weighted average cost of capital. It is the rate that a firm  pays to its…

Q: 4) An investor purchases one municipal and one corporate bond that pay rates of return of 7.5% and…

A: Municipal and corporate bonds are the financial instruments that offer fixed rates of return to the…

Q: If a taxpayer's marginal tax rate is 33 percent, what is the after-tax yield on a corporate bond…

A: Marginal tax rate = 33% Before tax interest on corporate bond = 5%

Q: Frosty Corporation pays 11.6% interest on its outstanding bonds.  If its tax rate is 40%, what is…

A: When the corporation pays the interest on bonds, they are eligible to deduct this as an expense in…

Q: For a taxpayer in the 25% marginal tax bracket, a 20-year municipal bond currently yielding 5.5%…

A: Tax-Equivalent Yield The pre-tax yield of the taxable bond that would generate equal net yield to…

Q: b) You can invest in taxable bonds that are paying a yield of 9.50% or a municipal bond paying a…

A: A security bond is a legally enforceable promise to pay the government if you or your employee…

Q: 1. Suppose an investor is considering a corporate bond with a 7.17% before-tax yield and a municipal…

A: 1. After Tax Return from Corporate Bond =Return from Municipal Bond  Before Tax Return*(1-t) =…

Q: Suppose an investor is considering a corporate bond with a 7.17% before-tax yield and a municipal…

A: For indifference, both bond should be equal after tax

Q: If the municipal bond rate is 6% and the corporate bond rate is 8%, what is the marginal tax rate,…

A: The taxable equivalent yield is 8% in this scenario whereas tax free yield is 6%. We need to find…

Q: Suppose that JB Cos. has a capital structure of 75 percent equity, 25 percent debt, and that its…

A: WACC is weighted Average cost of Capital shows the average cost of Capital obtained from the all…

Q: Assume your in the 35% tax bracket and purchased a municipal bond with a yield of 3.60. What is the…

A: Taxable equivalent yield is the return on taxable investment which is equal to the tax-exempt…

Q: An investor is in the 28% tax bracket. A corporate bond has a before-tax yield of 8%. What is the…

A: Given details are : Before tax yield = 8% Tax rate = 28% = 0.28 We need to compute the equivalent…

Q: Terrier Company is in a 50 percent tax bracket and has a bond outstanding that yields 12 percent to…

A: A debt is a security instrument that I s issued by the organization to raise the funds from the…

Q: Suppose that TapDance, Inc.'s, capital structure features 65 percent equity, 35 percent debt, and…

A:

Q: Assume that an individual owns a bond that they purchased for $100,000. The bond has a 10% coupon.…

A: Bonds- A bond is a fixed-income tool that represents a loan made by a shareholder to a borrower…

Q: A bond issued by the Irbid Municipal is priced to yield 7.80%. If you are in the 15% tax bracket his…

A: Tax Equivalent Yield = Tax free municipal yield / (1 -tax rate)

Q: The after-tax cost of debt capital is equal to the yleld to maturity on a corporate bond multiplied…

A: The cost of debt capital refers to the total cost associated with the raising of capital by issuing…

Q: Suppose the interest rate on a taxable corporate bond is 4 percent while a municipal, tax exempt…

A: Step 1 Bonds are used for borrowing money by the corporates or state governments or municipalities…

Q: Mr. Brown is in the 10% federal income tax bracket and wants to invest $8,000 in interest-earning…

A: Rate of return is an expected profit on an investment by an investor. It is a rate at which investor…

Q: A state issued muni bond offered at a coupon rate of 4% is preferred over a junk bond of 6% when a…

A: Municipal securities, sometimes known as "muni bond," are bonds issued by states, cities, counties,…

Q: A municipal bond has a yield to maturity of 3.8 percent. What corporate bond yield would make  an…

A: Yield on Municipal Bond should be equal to corporate bond yield * (1-tax rate), for indifference…

Q: Fergie has the choice between investing in a State of New York bond at 4.4 percent and a Surething…

A: Given: Marginal tax rate =30% Options available: Investing in a State of New York bond at…

Q: Suppose the interest rate on a taxable corporate bond is 7 percent while a municipal, tax exempt…

A:

Q: You purchase a tax-free municipal bond paying an annual rate of 6 percent. Find the before-tax rate…

A: Before tax rate = annual rate / (1-tax rate)

Q: Suppose that JB Cos. has a capital structure of 78 percent equity, 22 percent debt, and that its…

A: formula of wacc: wacc=we×re+wp×rp+wd×rd×1-tax where, we=weight of equitywd=weight of debtwp=weight…

Q: An investor purchases one municipal and one corporate bond that pay rates of retum of 5.00% and6.40%…

A: Given:Purchase one muncipal and one corporate bond that pay return of 5.00% and 6.40%.Investor is in…

Q: Assume you are in the 35 percent tax bracket and purchase a 3.60 percent municipal bond. Use the…

A: Formulas: Taxable equivalent yield = Municipal bond interest rate / (1- Tax rate)

Q: Determine the after-tax yield (i.e., IRR on the ATCF) obtained by an individual who purchases a…

A: The IRR is the rate at which the cost to purchase an asset is equal to the present value of cash…

Q: An investor is in a 30% tax bracket. If corporate bonds offer 6% yields, what must municipals offer…

A: Given: Tax rate = 30% Yield on corporate bond = 6%

Q: An investor purchases one municipal and one corporate bond that pay rates of return of 7.2% and…

A: The After-tax rate of return refers to the actual return from an investment that the investors…

Q: An overview of a firm's cost of debt For which capital component must you make a tax adjustment when…

A: Part 1) The correct option is C. Debt can be tax-adjusted while calculating WACC as debts are…

Q: An investor purchases one municipal bond and one corporate bond that pay rates of return of 9% and…

A: Given Tax rate =20% Return on municipal bond =9% Return on corporate bond = 10.5%

Q: A 7-year municipal bond with a face value of $1,000 earns annual income of $480. Your marginal tax…

A: Given: Annual income = $480 Tax rate = 36%

Q: You purchase a tax-free municipal bond paying an annual rate of 6 percent.Find the before-tax rate…

A: Tax rate is the percentage of amount that is paid by an individual or corporation to the government…