FOCUS ON PERSONAL FINANCE LL/ACCESS >BI
6th Edition
ISBN: 9781260529326
Author: Kapoor
Publisher: McGraw-Hill Publishing Co.
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Chapter 11, Problem 3P
Summary Introduction
To determine: Taxable equivalent yield for the investment.
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Assume you are in the 35 percent tax bracket and purchase a 3.60 percent municipal bond. Use the formula presented in this chapter to calculate the taxable equivalent yield for this investment.
Assume your in the 35% tax bracket and purchased a municipal bond with a yield of 3.60. What is the taxable equivalent yield for this investment?
Assume your in the 28% tax bracket and purchase a municipal bond with yield of 3.10%. What is the taxable equivalent yield for this investment?
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- What’s the taxable equivalent yield on a municipal bond with a yield to maturity of 4.1 percent for an investor in the 28 percent marginal tax bracket?arrow_forwardyou 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)arrow_forwardSuppose 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)arrow_forward
- 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?arrow_forwardSuppose 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)arrow_forwardA municipal bond carries a coupon of 6.75% and is trading at par. What is the equivalent taxable yield to a taxpayer in a combined federal plus state 34% tax bracket?arrow_forward
- Calculate the after-tax return of a(n) 5.625.62 percent, 20-year, A-rated corporate bond for an investor in the 1515 percent marginal tax bracket. Compare this yield to a(n) 3.683.68 percent, 20-year, A-rated, tax-exempt municipal bond, and explain which alternative is better. Repeat the calculations and comparison for an investor in the 3535 percent marginal tax bracket.arrow_forwardFind the equivalent taxable yield of a short-term municipal bond currently offering yields of 4% for tax brackets of (a) zero, (b) 10%, (c) 20%, and (d) 30%.arrow_forwardYou 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?arrow_forward
- For a taxpayer in the 25% marginal tax bracket, a 20-year municipal bond currently yielding 5.5% would offer an equivalent taxable yield of A. 10.75%. B. 5.5%. C. 7.33%. D. 4.125%.arrow_forwardYou purchase a tax-free municipal bond paying an annual rate of 6 percent. Find the before-tax rate if you are in the 15-percent tax bracket. 28-percent tax bracket. 36-percent tax bracket.arrow_forwardAn 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%arrow_forward
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