James Bank has purchased a bank-qualified municipal bond with a coupon rate of 4.5%. The bank...

James Bank has purchased a bank-qualified municipal bond with a coupon rate of 4.5%. The bank has had to borrow funds to make this purchase at a cost of 3.15%. The bank is in the 25% tax bracket. What is the net after-tax return on this bank-qualified municipal bond? Please show your work

Solutions

Expert Solution

jeff jeffy answered 2 years ago

Next > < Previous

Related Solutions

James Bank has purchased a bond that has a coupon rate of 7.25% and a face...

James Bank has purchased a bond that has a coupon rate of 7.25% and a face value of $1,000. It has 4 years to maturity and is currently selling in the market for $1,085. The bond makes annual coupon payments. What is the duration of this bond? Please show your work

Wan purchased a 7-year Treasury bond with a coupon rate of j2 = 4.5% p.a. and...

Wan purchased a 7-year Treasury bond with a coupon rate of j2 = 4.5% p.a. and a face value of $100 that matures at par and is subject to a 30% tax on interest and capital gain. The purchase price was $94.230. a. Use the approximate bond yield formula to estimate the net yield rate. Give your answer in j2 form, rounded to 3 decimal places. b. Use linear interpolation to calculate the net yield rate. Give your answer in...

What is the price of a $10,000 bond with a 4.5% coupon rate with quarterly coupon...

What is the price of a $10,000 bond with a 4.5% coupon rate with quarterly coupon payments, and 7 years to maturity if it has a YTM of 6%?

A tax-exempt municipal bond with a coupon rate of 7.00% has a market price of 98.35%...

A tax-exempt municipal bond with a coupon rate of 7.00% has a market price of 98.35% of par. The bond matures in 8.00 years and pays semi-annually. Assume an investor has a 38.00% marginal tax rate. The investor would prefer otherwise identical taxable bond if it's yield to maturity was more than _____% Answer format: Percentage Round to: 2 decimal places (Example: 9.24%, % sign required. Will accept decimal format rounded to 4 decimal places (ex: 0.0924

A municipal bond has 6 years until maturity and sells for $5,420. If the coupon rate...

A municipal bond has 6 years until maturity and sells for $5,420. If the coupon rate on the bond is 6.6 percent, what is the yield to maturity? Please explain each step thoroughly

A tax-exempt municipal bond with a coupon rate of 6.00% has a market price of 99.18%...

A tax-exempt municipal bond with a coupon rate of 6.00% has a market price of 99.18% of par. The bond matures in 13.00 years and pays semi-annually. Assume an investor has a 35.00% marginal tax rate. The investor would prefer otherwise identical taxable bond if it's yield to maturity was more than _____% (round to 2 decimal places).

A tax-exempt municipal bond with a coupon rate of 8.00% has a market price of 98.03%...

A tax-exempt municipal bond with a coupon rate of 8.00% has a market price of 98.03% of par. The bond matures in 10.00 years and pays semi-annually. Assume an investor has a 22.00% marginal tax rate. The investor would prefer otherwise identical taxable bond if it's yield to maturity was more than _____% Caspian Sea Drinks needs to raise $50.00 million by issuing bonds. It plans to issue a 15.00 year semi-annual pay bond that has a coupon rate of...

A tax-exempt municipal bond with a coupon rate of 5.00% has a market price of 99.48%...

A tax-exempt municipal bond with a coupon rate of 5.00% has a market price of 99.48% of par. The bond matures in 6.00 years and pays semi-annually. Assume an investor has a 16.00% marginal tax rate. The investor would prefer otherwise identical taxable bond if it's yield to maturity was more than _____%

The TIPS bond has an annual coupon rate of 4.5%. The table below shows the history...

The TIPS bond has an annual coupon rate of 4.5%. The table below shows the history of inflation rates for the first three years of the bond’s life. Time Inflation for Yr Just Ended Par Value 0 $1,000 1 3% 2 4% 3 3% a. What was the nominal return in year 2? b. What was the real return in year 2? c. What was the nominal return in year 3? d. What was the real return in year 3?

You own a convertible bond that has a 6% yield, 4.5% coupon rate, pays semiannually, and...

You own a convertible bond that has a 6% yield, 4.5% coupon rate, pays semiannually, and has 3 years to maturity. The conversion rate is 8. The current stock price is 127.3. Calculate your gain or loss if you decide to convert. Answer is 59.03 Please show steps. - no excel

Subjects