D) Suppose you can invest in a money market security that matures in 75 days and offers a 3% nominal annual interest rate (i.e., bond equivalent yield). What is the effective annual interest return on this security?
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- Suppose you invest in a municipal bond that pays a yield of 4. If your marginal tax is 17%, what is the equvalent yield on the taxable bond? (write your answer in percentage and round it to 2 decimal places)You can invest in taxable bonds that are paying a yield of 9.7 percent or a municipal bond paying a yield of 7.95 percent. Assume your marginal tax rate is 21 percent. a. Calculate the after-tax rate of return on the taxable bond? (Round your answer to 2 decimal places. (e.g., 32.16))b. Which security bond should you buy?If the municipal bond rate is 6% and the corporate bond rate is 8%, what is the marginal tax rate, assuming investors are indifferent between the two bonds?
- Suppose you invest in a municipal bond that pays a yield of 9%. If your marginal tax is 17%, what is the equivalent yield on the taxable bond?A municipal bond carries a coupon rate of 4.25% and is trading at par. What would be the equivalent taxable yield of this bond to a taxpayer in a 35% combined tax bracket? (Round your answer to 2 decimal places.)Suppose that short-term municipal bonds currently offer yields of 4%, while comparable taxable bonds pay 5%. Required: Which gives you the higher after-tax yield if your combined tax bracket is: Higher After-Tax Yield a. Zero Municipal bond b. 10% Taxable bond c. 20% Municipal bond d. 30% Neither
- you invest in a municipal bond that pays a yield of 10%. If your marginal tax is 26%, what is the equIvalent yield on the taxable bond? (write your answer in percentage and round it to 2 decimal places)A municipal bond has a yield to maturity of 3.8 percent. What corporate bond yield would make an investor in the 29 percent tax bracket indifferent between two bonds, all else the same?An investor is comparing the following two bonds: a bond from ABC Corp which pays an interest rate of 9 percent per year and a municipal bond which pays an interest rate of 7.9 percent per year. The investor is in the 22 percent tax bracket. Which bond will give the investor a higher after-tax interest rate and for which reason? a. The ABC bond because it pays a 9 percent interest rate, while the municipal bond only pays 7.9 percent. b. None of these is correct. c. The ABC bond because it pays an equivalent after-tax rate of 11.5 percent, while the municipal bond pays out an equivalent after-tax rate of 10.1 percent. d. The municipal bond because it pays an equivalent after-tax rate of 7.9 percent, while the ABC bond pays out an after-tax 7.02 percent interest rate. e. The municipal bond because it pays an equivalent after-tax rate of 7.9 percent, while the ABC bond pays out an equivalent after-tax rate of 2.0 percent.
- You can invest in taxable bonds that are paying a yield of 9.50 percentor a municipal bond paying a yield of 7.75 percent. If your marginaltax rate is 21 percent,which security bond should you buy?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 a municipal bond has a yield of 5.75% and corporate bond of comparable maturity and credit rating has a yield of 7%. For each marginal tax rate below calculate the after tax yield for the municipal bond and the corporate bond Type your answer below as a percentage (not decimals) 10% Muni: Corporate: * 20% Muni:! Corporate: Corporate 25% Muni: Muni:| Corporate: · 30%