Suppose you invest in a municipal bond that pays a yield of 149%. If your marginal tax is 15%, what is the equivalent yield on the taxable bond? (write your answer in percentage and round it to 2 decimal places)

Suppose you invest in a municipal bond that pays a yield of 149%. If your marginal tax is 15%, what is the equivalent yield on the taxable bond? (write your answer in percentage and round it to 2 decimal places)

CONCEPTS IN FED.TAX.,2020-W/ACCESS

20th Edition

ISBN:9780357110362

Author:Murphy

Publisher:Murphy

Chapter4: Income Exclusions

Section: Chapter Questions

Problem 58P

See similar textbooks

Related questions

Q: You buy a zero coupon bond at the beginning of the year that has a face value of $1,000, a YTM of 10…

A: Bonds are the financial instruments that represent the debt of an organization. Bonds are generally…

Q: What's the taxable equivalent yield on a municipal bond with a yield to maturity of 3.8 percent for…

A: Taxable equivalent yield on a municipal bond refers to the return that we require on a taxable…

Q: What is the cost of debt for Kenny Enterprises if the bond sells at $938.10? % (Round to two decimal…

A: Answer A. $938.10 Given Fv= 1000 Pv=938.10 Coupon rate = 10.2% Pmt= 10.2×1000/2 = 102/2 = 51 N=…

Q: Abner Corporation's bonds mature in 24 years and pay 15 percent interest annually. If you purchase…

A: Price of bond = $ 1050 Years to maturity = 24 Par value = $ 1000 Coupon rate = 15% Annual coupon…

Q: Suppose that the yield to maturity of the 4% coupon, 35-year maturity bond falls to 6% by the end of…

A: Given: Assumption: Face value of the bond has 1,000

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: You are considering investing in a bond that matures 20 years from now (the par value of the bond is…

A: Time Period = 20 Years Par Value = $1,000 Coupon Rate = 9.65% or Coupon Value = $96.5 Current Value…

Q: the bond. If the current one-year interest rate on government bonds is 8 percent, then the price…

A: Time Period = 2 years Face Value = 5000 Coupon = Coupon Rate * Face Value = 6%*5000 = 300 Interest…

Q: Consider the decision to purchase either a five year corporate bond or a five year municipal bond.…

Q: A municipal bond you are considering as an investment currently pays a yield of 6.76 percent. a.…

A: The tax-equivalent yield is the rate of return that a taxable bond must achieve in order to match…

Q: A corporate bond that you own at the beginning of the year is worth $975. During the year, it pays…

A: The provided information are: Opening price = $975 Interest payment = $ 35 Closing price = $965

Q: A Treasury bond that you own at the beginning of the year is worth $1,100. During the year, it pays…

A: Treasury Bond: Beginning value (purchase price)= 1100 Ending value (Sale price)= 1110 Interest…

Q: You have just purchased a municipal bond with a $10,000 par value for $9,500. You purchased it…

A: Given information: Par value of bond is $10,000 Purchase price is $9,500 Bond rate is 6.6% per year…

Q: What’s the taxable equivalent yield on a municipal bond with a yield to maturity of 4.1 percent for…

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

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: 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: What would you pay for a $175,000 debenture bond that matures in 15 years and pays $8,750 a year in…

A: Issue price of the debenture = Present value of principal + Present value of interest payments…

Q: what is the equIvalent yield on the taxable bond?

A: Tax Equivalent Yield: It is the return needed for a taxable bond to equal the yield of the…

Q: Ladder Works has debt outstanding with a coupon rate of 6 percent and a yield to maturity of 6.8…

A: Cost of Debt It is the cost of raising capital of debt sources by the issuer(company).…

Q: Abner Corporation's bonds mature in 23 years and pay 11 percent interest annually. If you purchase…

A: Face Value = $1000 (Assumed) Maturity = 23 years Coupon rate = 11% Coupon amount = $1000*11% = $110…

Q: You bought a 10-year, 5% coupon bond for $1,000 and sold it 1 year later for $1,100. The bond pays…

A: For calculating after tax rate of return we will need after tax coupon and after tax capital gain.

Q: You can invest in taxable bonds that are paying a yield of 9.7 percent or a municipal bond paying a…

A: A financial instrument that does not affect the ownership of the common shareholders or management…

Q: A corporate bond that you own at the beginning of the year is worth $915. During the year, it pays…

A: A CORPORATE BOND IS A DEBT ISSUED BY A COMPANY IN ORDER TO RAISE CAPITAL . CAPITAL GAIN : = VALUE…

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: The coupon rate on a tax-exempt bond is 5.6%, and the rate on a taxable bond is 8%. Both bonds sell…

A: Tax-exempt bond is 5.6%. By using the formula of Equivalent taxable yield, The formula of…

Q: 1. Calculate the price of a zero-coupon bond that matures in 12 years if the market interest rate is…

A: “Since you have asked multiple question, we will solve the first question for you. If you want any…

Q: What would you pay for a $65,000 debenture bond that matures in 10 years and pays $9,100 a year in…

A: Bond Price: It is the price paid by the bondholder for investing in the bond. Bond price is…

Q: What is the taxable equivalent yield on a municipal bond with a yield to maturity of 4 percent for…

A: In this question we need to compute the taxable equivalent yield on a municipal bond.

Q: You pay $5600 for a municipal bond. When it matures after 15 years, you receive $11,000 The total…

A: Pay for Municipal Bond $ 5600 Matures After 15 Years. We received $11000 Total Return calculated as…

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: what is the equivalent yield on the taxable bond?

A: Equivalent Yield on Taxable Bond: It refers to the yield on the taxable bond needed to be made equal…

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: Suppose your marginal federal income tax rate is 25 percent. 1. What is your after-tax return from…

A: The question is to study the impact on tax rate on yield of different types of bonds, in general…

Q: You are considering investing in a bond that matures 20 years from now (the par value of the bond is…

A: A bond is a financial security that generates periodic coupon payments at a predetermined rate on…

Q: What is the yield on a corporate bond with a $1000 face value purchased at a discount price of $850,…

A: The Current Yield is the investment annual income which is divided by the market price. It shows the…

Q: Ernie's has 3,500 bonds outstanding with a face value of $1,000 each and a coupon rate of 8.5…

A: The interest tax shield is the amount of rebate granted from taxable income because of the tax…

Q: Suppose you invest in a municipal bond that pays a yield of 4. If your marginal tax is 17%, what is…

A: Here, Municipal Bond Yield is 4% Marginal tax Rate is 17%

Q: An investor is comparing the following two bonds: a bond from ABC Corp which pays an interest rate…

A: Taxation-Taxation means imposing a tax on individuals and different types of organizations. Which…

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: What would you pay for a $65,000 debenture bond that matures in 10 years and pays $9,100 a year in…

A: A bond is an instrument that represents the loan that is made by the investor to the company and…

Q: You buy a zero coupon bond at the beginning of the year that has a face value of $1,000, a YTM of 13…

A: Implied interest should be taxable and needs to be declare on your tax return.

Q: Suppose you invest in a municipal bond that pays a yield of 9%. If your marginal tax is 17%, what is…

A: The tax-equivalent yield is the rate of return necessary for a taxable bond to equal the rate of…

Question

Suppose you invest in a municipal bond that pays a yield of 149%. If your marginal tax is 15%, what is the equivalent yield on the taxable bond? (write your answer in percentage and round it to 2
decimal places)
A Moving to another question will save this response.
«< Question 22 of 25>»
DELL

Expert Solution

This question has been solved!

Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.

SEE SOLUTION Check out a sample Q&A here

Step 1

VIEW

Step 2

VIEW

Step by step

Solved in 2 steps with 1 images

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.

Similar questions

An investor in the 22 percent tax bracket is trying to decide which of two bonds to select: one is a 5.5 percent U.S. Treasury bond selling at par; the other is a municipal bond with a 4.25 percent coupon, which is also selling at par. Which of these two bonds should the investor select? Why?
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)
Suppose you invest in a municipal bond that pays a yield of 9%. If your marginal tax is 29%, what is the equivalent yield on the taxable bond? (write your answer in percentage and round it to 2 decimal places)
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)
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?
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?
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?
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?
Suppose your company needs to raise $36.9 million and you want to issue 24-year bonds for this purpose. Assume the required return on your bond issue will be 9.4 percent, and you’re evaluating two issue alternatives: a 9.4 percent semiannual coupon bond and a zero coupon bond. Your company’s tax rate is 35 percent. Both bonds would have a face value of $1,000. Assume that the IRS amortization rules apply for the zero coupon bonds. Calculate the firm’s aftertax cash outflows for the first year under the two different scenarios.
Kelly Phillips, an investor who resides in Livingston NJ, has a marginal tax rate of 28%. If a NJ municipal bond has a coupon rate of 5.83% and a YTM of 5.53%, what is the equivalent pretax yield on a taxable bond? a. 7.68% b. 8.10% c. 4.20% d. 3.98% e. 5.94%
Consider the decision to purchase either a five year corporate bond or a five year municipal bond. The corporate bond has a 13% annual coupon with a par value of $1000 with a current yield of 11%. The municipal bond has 11% annual coupon and a par value of $1000 that is currently yielding at 9%. Which of the two bond will be more beneficial to you. Assume that your marginal tax rate is 30%.
Suppose your company needs to raise $40.8 million and you want to issue 25-year bonds for this purpose. Assume the required return on your bond issue will be 5.8 percent, and you’re evaluating two issue alternatives: a 5.8 percent semiannual coupon bond and a zero coupon bond. Your company’s tax rate is 23 percent. a. How many of the coupon bonds would you need to issue to raise the $40.8 million? How many of the zeroes would you need to issue? (Do not round intermediate calculations. Round your coupon bond answer to the nearest whole number, e.g., 32 and your zero coupon bond answer to 2 decimals, e.g., 32.16.) b. In 25 years, what will your company’s repayment be if you issue the coupon bonds? What if you issue the zeroes? (Do not round intermediate calculations and enter your answers in dollars, not millions, rounded to the nearest whole number, e.g., 1,234,567.) c. Assume that the IRS amortization rules apply for the zero coupon bonds. Calculate the firm’s aftertax…