Homework Answers
| 5) | Municipal bonds are more advantageous than federal bonds | ||||||
| because the interest income is exempt from federal, state, and | |||||||
| local taxes. The interest income on federal bonds is exempt from | |||||||
| state and local taxes, but it is not exempt from federal taxes. | |||||||
| b. False. | |||||||
| 6) | A chattel mortgage bond is backed by personal property. | ||||||
| The collateral on the bond is a personal property like a car or | |||||||
| a business. | |||||||
| a. True. |
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5. Federal Bonds offer more tax advantages than municipal bonds because interest income eamed on Federal...
1 Bearer Bonds require the issuer to have verifiable information on the owners of ther bonds...
1 Bearer Bonds require the issuer to have verifiable information on the owners of ther bonds a True b. False 2. The issuer's cost of financing with bonds is commonly measured by: a Annual Percentage Rate b. Annual Pareontage Yield Yield to Matu d. Yield Annualized Common 3. 30-year Bonds are issued by the US Treasury to finance deficits: a True b. False 4. General obligation bonds issued by a municipality are backed by the full faith and credit of...
tax-exempt interest income on municipal bonds is not reported on the tax return? true or false
tax-exempt interest income on municipal bonds is not reported on the tax return? true or false
Municipal bonds are tax-exempt from the Federal income tax. Assume a new 10-year municipal bond has...
Municipal bonds are tax-exempt from the Federal income tax. Assume a new 10-year municipal bond has a 3%/year coupon rate. What would be the required coupon rate on a taxable bond for an investor to be indifferent in holding a taxable bond compared to the 3% tax-free bond? Assume the investor is in a 40% marginal income tax bracket. Both bonds have the same credit quality. 5.0% 1.8% 1.2% 7.5% 3.0%
Entities paying more than what amount of Federal tax-exempt interest or interest-dividends that were earned on...
Entities paying more than what amount of Federal tax-exempt interest or interest-dividends that were earned on bonds issued by a state or local government other than California are required to provide an information return to the Franchise Tax Board? A. $10B. $50C. $100D. $500
Which of the following is a reason municipal bonds offer lower rates of interest income for...
Which of the following is a reason municipal bonds offer lower rates of interest income for their investors? Select one: A. They are able to avoid interest rate risk. B. They are tax exempt - at least at the federal level. C. They are able to offer reduced credit risk as they are backed by the federal government. D. They are able to avoid reinvestment rate risk. A two-year Treasury security currently earns 5.25 percent. Over the next two years,...
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...
The largest federal income tax subsidy measured by reduced revenue a.is the mortgage interest deduction. b.is the earned income tax credit (EITC). c.is the municipal bond interest exclusion. d.is the...
The largest federal income tax subsidy measured by reduced revenue a.is the mortgage interest deduction. b.is the earned income tax credit (EITC). c.is the municipal bond interest exclusion. d.is the exclusion from taxation of the value of health insurance benefits provided by employers to employees.
politicians feel that voters will not approve a municipal bond issue to fund the building because...
politicians feel that voters will not approve a municipal bond issue to fund the building because it would increase taxes. They opt to have a state bank issue $10 million of tax-exempt securities to pay for the building construction. The county then will make yearly lease payments (of principal and interest) to repay the obligation. Unlike conventional municipal bonds, the lease payments are not binding obligations on the county and, therefore, require no voter approval. Required Do you think the...
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...
What would happen to the risk premiums of municipal bonds if the federal government guarantees today...
What would happen to the risk premiums of municipal bonds if the federal government guarantees today that it will pay creditors if municipal governments default on their payments O A. Risk premium on municipal bonds will decrease O B. Risk premium on municipal bonds will stay the same. OC. Risk premium on municipal bonds will increase. OD. There is not enough information to tell. Do you think that it will then make sense for municipal bonds to be exempt from...
1 Bearer Bonds require the issuer to have verifiable information on the owners of ther bonds a True b. False 2. The issuer's cost of financing with bonds is commonly measured by: a Annual Percentage Rate b. Annual Pareontage Yield Yield to Matu d. Yield Annualized Common 3. 30-year Bonds are issued by the US Treasury to finance deficits: a True b. False 4. General obligation bonds issued by a municipality are backed by the full faith and credit of...
Municipal bonds are tax-exempt from the Federal income tax. Assume a new 10-year municipal bond has a 3%/year coupon rate. What would be the required coupon rate on a taxable bond for an investor to be indifferent in holding a taxable bond compared to the 3% tax-free bond? Assume the investor is in a 40% marginal income tax bracket. Both bonds have the same credit quality. 5.0% 1.8% 1.2% 7.5% 3.0%
Which of the following is a reason municipal bonds offer lower rates of interest income for their investors? Select one: A. They are able to avoid interest rate risk. B. They are tax exempt - at least at the federal level. C. They are able to offer reduced credit risk as they are backed by the federal government. D. They are able to avoid reinvestment rate risk. A two-year Treasury security currently earns 5.25 percent. Over the next two years,...
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...
What would happen to the risk premiums of municipal bonds if the federal government guarantees today that it will pay creditors if municipal governments default on their payments O A. Risk premium on municipal bonds will decrease O B. Risk premium on municipal bonds will stay the same. OC. Risk premium on municipal bonds will increase. OD. There is not enough information to tell. Do you think that it will then make sense for municipal bonds to be exempt from...
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