Question

An investor purchases one municipal bond and one corporate bond that pay rates of return of 7% and 8.5%, respectively. If the investor is in the 20% tax bracket, his after-tax rates of return on the municipal and corporate bonds would be, respectively, _____.

An investor buys a T-bill at a bank discount quote of 5.40 with 90 days to maturity. The investor's actual annual rate of return on this investment is _____.

What is the tax exempt equivalent yield on a 14% bond yield given a marginal tax rate of 24%?

A T-bill quote sheet has 90-day T-bill quotes with a 5.02 bid and a 4.96 ask. If the bill has a $10,000 face value, an investor could buy this bill for _____.

The Chompers Index is a price weighted stock index based on the 3 largest fast food chains. The stock prices for the three stocks are $82, $37, and $72. What is the price weighted index value of the Chompers Index?

Answer 1

(1) Municipal Bond: Before-Tax Return = 7%, Tax Rate = 20 %, After-Tax Return = 7 x (1-0.2) = 5.6 %

Corporate Bond: Before-Tax Return = 8.5 %, Tax Rate = 20 %, After-Tax Return = 8.5 x (1-0.2) = 6.8 %

NOTE: Please raise separate queries for solutions to the remaining unrelated questions, as one query is restricted to the solution of only one complete question with up to four sub-parts.