43 Assume that Bill's marginal tax rate is 22 percent. If corporate bonds pay 6 percent...
43 Assume that Bill's marginal tax rate is 22 percent. If corporate bonds pay 6 percent interest, what interest rate would a municipal bond have to offer for Bill to be indifferent between the two bonds?
Homework Answers
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Interest rate municipal bond have to offer to be indifferent = 6% * (1-0.22) = 6%*0.78 = 4.68% Comment if you face any issues |
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43 Assume that Bill's marginal tax rate is 22 percent. If
corporate bonds pay 6 percent...
Assume that Bill's marginal tax rate is 22 percent. If corporate bonds pay 9 percent interest,...
Assume that Bill's marginal tax rate is 22 percent. If corporate bonds pay 9 percent interest, what interest rate would a municipal bond have to offer for Bill to be indifferent between the two bonds? (Do not round your final answer.) 10.80 percent 22.00 percent 8.00 percent 7.02 percent 9.00 percent
Assume that Keisha's marginal tax rate is 37 percent and her tax rate on dividends is...
Assume that Keisha's marginal tax rate is 37 percent and her tax rate on dividends is 20 percent. If a city of Atlanta bond pays 8.48 percent interest, what dividend yield would a dividend-paying stock (with no growth potential) have to offer for Keisha to be indifferent between the two investments from a cash-flow perspective? None of the choices are correct. 20.00 percent 10.60 percent 11.60 percent 8.48 percent
A corporate bond selling at par currently yields 7.5%. Amy's marginal tax rate is 20%. How...
A corporate bond selling at par currently yields 7.5%. Amy's marginal tax rate is 20%. How much should a municipal bond selling at par yields so that Amy is indifferent between this two bonds?
1)- A municipal bond selling at par currently yields 7.5%. A corporate bond selling at par...
1)- A municipal bond selling at par currently yields 7.5%. A corporate bond selling at par currently yields 10%. At what marginal tax rate would an investor be indifferent between this two bonds? 2)- A corporate bond selling at par currently yields 7.5%. Amy's marginal tax rate is 20%. How much should a municipal bond selling at par yields so that Amy is indifferent between this two bonds? 3)- A municipal bond selling at par currently yields 6.5%. Bob's marginal...
A municipal bond has yield to maturity of 5.08 percent. A comparable corporate bond has yield...
A municipal bond has yield to maturity of 5.08 percent. A comparable corporate bond has yield to maturity of 7.24 percent. Which of these two bonds should an investor with a marginal tax rate of 28 percent buy? A. The corporate bond because it offers a higher after-tax yield to maturity. B. The corporate bond because its stated yield to maturity of 7.24 percent is higher than the municipal bond's stated yield to maturity of 5.08 percent. CC. The municipal...
Assume that Juanita is indifferent between investing in a corporate bond that pays 10.20 percent interest...
Assume that Juanita is indifferent between investing in a corporate bond that pays 10.20 percent interest and a stock with no growth potential that pays a 6 percent dividend yield. Assume that the tax rate on dividends is 15 percent. What is Juanita's marginal tax rate?
(7-10) You pay a 32% marginal tax rate. You are considering investing in one of two...
(7-10) You pay a 32% marginal tax rate. You are considering investing in one of two bonds. First, there is a tax-free municipal bond that pays 4.30%. There is also a corporate (taxable) bond available with the same maturity and equal risks in all other senses to the municipal bond. In order to realize the same after-tax return for you, what rate must the corporate bond yield?
A municipal bond selling at par currently yields 6.5%. Bob's marginal tax rate is 20%.How much...
A municipal bond selling at par currently yields 6.5%. Bob's marginal tax rate is 20%.How much should a corporate bond selling at par yields so that Bob is indifferent between this two bonds?
Hugh has the choice between investing in a City of Heflin bond at 6 percent or...
Hugh has the choice between investing in a City of Heflin bond at 6 percent or a Surething bond. Assuming that both bonds have the same nontax characteristics and that Hugh has a 28 percent marginal tax rate. What interest rate does Surething, Inc. need to offer to make Hugh indifferent between investing in the two bonds?
Dennis is currently considering investing in municipal bonds that earn 7.80 percent interest, or in taxable...
Dennis is currently considering investing in municipal bonds that earn 7.80 percent interest, or in taxable bonds issued by the Coca-Cola Company that pay 10.40 percent. a. If Dennis’s tax rate is 22 percent, which bond should he choose? Municipal bonds Taxable bonds b. Which bond should he choose if his tax rate is 32 percent? Municipal bonds Taxable bonds c. At what tax rate would he be indifferent between the bonds? Tax rate: d. What strategy is this...
A municipal bond has yield to maturity of 5.08 percent. A comparable corporate bond has yield to maturity of 7.24 percent. Which of these two bonds should an investor with a marginal tax rate of 28 percent buy? A. The corporate bond because it offers a higher after-tax yield to maturity. B. The corporate bond because its stated yield to maturity of 7.24 percent is higher than the municipal bond's stated yield to maturity of 5.08 percent. CC. The municipal...
(7-10) You pay a 32% marginal tax rate. You are considering investing in one of two bonds. First, there is a tax-free municipal bond that pays 4.30%. There is also a corporate (taxable) bond available with the same maturity and equal risks in all other senses to the municipal bond. In order to realize the same after-tax return for you, what rate must the corporate bond yield?
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