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 12% marginal tax bracket, his or her after-tax rates of return on the municipal and corporate bonds would be ________ and ______, respectively. A) 7.2%; 9.1% B) 7.2%; 8.008% C) 6.12%; 7.735% D) 8.471%; 9.1% Provide an accurate answer with justification.

Q: Corporate bonds issued by Johnson Corporation currently yield 8%. Municipal bonds of equal risk…

A: Current yield on Corporate bonds = 8% Current yield on Municipal bonds = 6% Formula: Corporate Bond…

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: An investor recently purchased a corporate bond that yields 10%. The investor is in the 38% combined…

A: In the above question we need to calculate the bond's after tax yield from the details given.

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: An investor is in the 24% tax bracket and lives in a state with no income tax. He is trying to…

A: We need to compute tax adjusted return for both the bonds

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

A: there will be no tax on municipal bonds

Q: 17. An investor purchases one municipal and one corporate bond that pay rates of return of 5.00% and…

A: Given Return on corporate = 5%

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: A municipal bond carries a coupon of 6.75% and is trading at par. What is the equivalent taxable…

A: The formula to compute equivalent taxable yield is as follows:

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: 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: 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: Assume a municipal bond has a yield of 5.75% and corporate bond of comparable maturity and credit…

A: After tax Yield on Municipal Bond = Before Tax Yield on Municipal Bond After tax Yield on Municipal…

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: The current yield on a municipal bons is 6%. What would the equivalent taxable yield of this bond…

A: Yield on municipal bond is tax free. But yield on corporate bond is taxable. Given: Yield on…

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 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…

Cash and Liquid Asset Management

Cash management is the process of controlling cash inflow & cash outflow, managing the cashflows inside the business, and utilizing the cash for business operation at any point in time. A business has to maintain a certain level of cash to meet various financial obligations. Cash management is essential because businesses must utilize the cash to generate maximum profit. Cash management also ensures to maintain maximum liquidity in the business.