Assume you own a corporate bond that has a face value of $1,000 and pays 5.8...

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Question

Assume you own a corporate bond that has a face value of $1,000 and pays 5.8 percent. What is the current yield if the bond i

Assume you are in the 35 percent tax bracket and purchase a municipal bond with a yield of 4.50 percent. Use the formula pres

Answer 1

Answer #1

1.

Current Yield = Annual Coupon/Bond Price

Current Yield = 58/1,160

Current Yield = 5.00%

2.

Taxable Equivalent Yield = Yield on Municipal Bond/(1 - Tax rate)

Taxable Equivalent Yield = 0.045/(1 - 0.35)

Taxable Equivalent Yield = 6.92%

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Answer 2

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