Homework Answers
Please find below the solution.. let me know if you need any clarification
correct answer is option : When comparing 20 year bond versus a 1 year bond the 20 year bond has a much greater interest rate ris,
higher the maturity higher will be interest rate risk. Lower the coupon rate highe will be interest rate risk.
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Which one of the following is true? When comparing a 20-year bond versus a Iyear bond,...
Which one of the following is true? Interest Rate Risk is the risk that arises for...
Which one of the following is true? Interest Rate Risk is the risk that arises for bond owners from fluctuating interest rates. All other things being equal, the higher the coupon rate, the greater the interest rate risk. Interest Rate Risk is the risk that arises for bond owners from fluctuating interest rates. All other things being equal, the shorter the time to maturity, the lower the interest rate risk. O When comparing a 20-year bond versus a 1-year bond,...
Ms. Drake is deciding between investing $50,000 in two different municipal bonds, both of which have...
Ms. Drake is deciding between investing $50,000 in two different municipal bonds, both of which have the same risk. The first option is state of Colorado bonds paying interest of 3.35%. The second option is state of Texas bonds paying interest of 3.50%. All income from either bond investment is nontaxable at the federal level. Because Ms. Drake is a resident of Colorado, any income from the Colorado bond is nontaxable at the state level as well. However, any income...
2. Ms. Drake is deciding between investing $50,000 in two different municipal bonds, both of which...
2. Ms. Drake is deciding between investing $50,000 in two different municipal bonds, both of which have the same risk. The first option is state of Colorado bonds paying interest of 3.35%. The second option is state of Texas bonds paying interest of 3.50%. All income from either bond investment is nontaxable at the federal level. Because Ms. Drake is a resident of Colorado, any income from the Colorado bond is nontaxable at the state level as well. However, any...
2. Bond Investment Recommendation (6 pts.) Suppose that you are a financial advisor to two individuals...
2. Bond Investment Recommendation (6 pts.) Suppose that you are a financial advisor to two individuals who are considering investing in either a taxable Corporate Bond with an interest rate of 7.25%, or a federal tax-exempt Municipal Bond with a rate of 5.12%. Assume that both bonds have the same default risk and that, given their respective levels of income, one of the investors, Ms. Benson, is subject to a marginal income tax rate of 39%, while the other investor,...
Which stock exchange is a “virtual exchange”? I. London stock exchange II. New York Stock...
Which stock exchange is a “virtual exchange”? I. London stock exchange II. New York Stock exchange III. Tokyo stock exchange IV. Over-the-counter market I and II only III and IV only I only IV only Kensington Company stock was selling at $132 a share when Charlotte sold 300 shares of the stock short. Today Charlotte bought 300 shares of the same stock at a price of $140 per share to cover her position. Ignoring trading costs, what...
Below is how far I have gotten: Benefit of federal tax rate: ? 2. Ms. Drake...
Below is how far I have gotten:
Benefit of federal tax rate: ?
2. Ms. Drake is deciding between investing $50,000 in two different municipal bonds, both of which have the same risk. The first option is state of Colorado bonds paying interest of 3.35%. The second option is state of Texas bonds paying interest of 3.50%. All income from either bond investment is nontaxable at the federal level. Because Ms. Drake is a resident of Colorado, any income from...
3.2% 2.5% 0/1 pt Question 32 Assume that the current interest rate on a one-year bond...
3.2% 2.5% 0/1 pt Question 32 Assume that the current interest rate on a one-year bond is 8 percent, the current rate on a two-year bond is 10 percent, and the current rate on a three-year bond is 12 percent. If the expectations theory of the term structure is correct, what is the one-year interest rate expected during Year 3? (Base your answer on an arithmetic average rather than a geometri average.) 12% 16% 13% Incorrect. The yield on any...
17. Which is true about Treasury notes and bonds? (May be more than one) a. They...
17. Which is true about Treasury notes and bonds? (May be more than one) a. They pay annual coupon payments b. They are now issued in both bearer and book entry format c. Their secondary market is very active d. The interest earned on them is exempt from State and Local Income taxes e. The interest earned on them is exempt from Federal, State and Local Income taxes f. Treasury notes pay annual interest while Treasury bonds pay semiannual interest...
Jennifer is in the 25% federal income tax bracket and the 3% state income tax bracket....
Jennifer is in the 25% federal income tax bracket and the 3% state income tax bracket. If Jennifer purchases a municipal bond yielding 4.25%, what is her after-tax equivalent yield if the bond income is exempt from both federal and state taxes? 5.84% 5% 7.55% 8. A bond has a YTM of 6.5%, a modified duration of 16.9 years, a duration of 18 years and a 30 year maturity. By what percentage will the bond's price change if market interest...
45. Steven has $100,000 to purchase a bond. Two bonds of similar credit risk are available....
45. Steven has $100,000 to purchase a bond. Two bonds of similar credit risk are available. The first is taxable with an eight-percent yield; the second is tax-exempt with a five-percent yield. Steven is in the 39.6 percent federal income tax bracket and the 3.23 percent state income tax bracket. Which bond should Steven purchase? How much higher is his return in the first year for this bond versus the other? taxable : 100,000 * 8%= 8,000 income, * (39.6%...
Which one of the following is true? Interest Rate Risk is the risk that arises for bond owners from fluctuating interest rates. All other things being equal, the higher the coupon rate, the greater the interest rate risk. Interest Rate Risk is the risk that arises for bond owners from fluctuating interest rates. All other things being equal, the shorter the time to maturity, the lower the interest rate risk. O When comparing a 20-year bond versus a 1-year bond,...
2. Ms. Drake is deciding between investing $50,000 in two different municipal bonds, both of which have the same risk. The first option is state of Colorado bonds paying interest of 3.35%. The second option is state of Texas bonds paying interest of 3.50%. All income from either bond investment is nontaxable at the federal level. Because Ms. Drake is a resident of Colorado, any income from the Colorado bond is nontaxable at the state level as well. However, any...
2. Bond Investment Recommendation (6 pts.) Suppose that you are a financial advisor to two individuals who are considering investing in either a taxable Corporate Bond with an interest rate of 7.25%, or a federal tax-exempt Municipal Bond with a rate of 5.12%. Assume that both bonds have the same default risk and that, given their respective levels of income, one of the investors, Ms. Benson, is subject to a marginal income tax rate of 39%, while the other investor,...
Below is how far I have gotten:
Benefit of federal tax rate: ?
2. Ms. Drake is deciding between investing $50,000 in two different municipal bonds, both of which have the same risk. The first option is state of Colorado bonds paying interest of 3.35%. The second option is state of Texas bonds paying interest of 3.50%. All income from either bond investment is nontaxable at the federal level. Because Ms. Drake is a resident of Colorado, any income from...
3.2% 2.5% 0/1 pt Question 32 Assume that the current interest rate on a one-year bond is 8 percent, the current rate on a two-year bond is 10 percent, and the current rate on a three-year bond is 12 percent. If the expectations theory of the term structure is correct, what is the one-year interest rate expected during Year 3? (Base your answer on an arithmetic average rather than a geometri average.) 12% 16% 13% Incorrect. The yield on any...
17. Which is true about Treasury notes and bonds? (May be more than one) a. They pay annual coupon payments b. They are now issued in both bearer and book entry format c. Their secondary market is very active d. The interest earned on them is exempt from State and Local Income taxes e. The interest earned on them is exempt from Federal, State and Local Income taxes f. Treasury notes pay annual interest while Treasury bonds pay semiannual interest...
45. Steven has $100,000 to purchase a bond. Two bonds of similar credit risk are available. The first is taxable with an eight-percent yield; the second is tax-exempt with a five-percent yield. Steven is in the 39.6 percent federal income tax bracket and the 3.23 percent state income tax bracket. Which bond should Steven purchase? How much higher is his return in the first year for this bond versus the other? taxable : 100,000 * 8%= 8,000 income, * (39.6%...
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