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A 4.5 percent coupon municipal bond has 10 years left to maturity and has a price...

A 4.5 percent coupon municipal bond has 10 years left to maturity and has a price quote of $977.50. The bond can be called in four years. The call premium is one year of coupon payments. What is the bond's taxable equivalent yield for an investor in the 33 percent marginal tax bracket? (Assume interest payments are paid semi-annually)

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Answer #1

1,000 4.5% 2 22.5 977.5 10 A 5 A Face value (FV) 6 B Coupon rate c Number of compounding periods per year 8 AxB:C Interest pe

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