Question

In: Finance

An investor purchases one municipal and one corporate bond that pay rates of return of 7.2%...

An investor purchases one municipal and one corporate bond that pay rates of return of 7.2% and 9.1%, respectively. If the investor is in the 12% marginal tax bracket, his or her after-tax rates of return on the municipal and corporate bonds would be ________ and ______, respectively.

Solutions

Expert Solution

Sol:

After Tax return on municipal bond = 0.072 or 7.2%

After Tax return on corporate bond = 0.091× (1 - 0.12) = 0.08008 or 8.008%

jeff jeffy answered 2 years ago
Next > < Previous

Related Solutions

An investor purchases one municipal bond and one corporate bond that pay rates of return of...
An investor purchases one municipal bond and one corporate bond that pay rates of return of 5% and 6.4%, respectively. The investor is in the 15% tax bracket. Please calculate his after-tax rates of return on both the municipal bond and the corporate bond. Please enter your answer with TWO decimal points. Muni bond:  % Corp bond:  %
An investor purchases one municipal bond and one corporate bond that pay rates of return of...
An investor purchases one municipal bond and one corporate bond that pay rates of return of 6% and 7.4%, respectively. If the investor is in the 15% tax bracket, his after-tax rates of return on the municipal and corporate bonds would be, respectively, _____. Multiple Choice 6.90% and 6.29% 6% and 7.4% 6% and 6.29% 5.10% and 7.4%
An investor purchases one municipal bond and one corporate bond that pay rates of return of 4.8% and 7.4%, respectively.
An investor purchases one municipal bond and one corporate bond that pay rates of return of 4.8% and 7.4%, respectively. If the investor is in the 23% tax bracket, his after-tax rates of return on the municipal and corporate bonds would be, respectively, _______ and _______.
1. The expected return on a corporate bond is less than the investor required return for...
1. The expected return on a corporate bond is less than the investor required return for that bond. Which of the following is the most likely market response to that relationship? A. The price will rise and the expected return will rise as a result of market trading of this bond. B. The price will rise and the expected return will fall as a result of market trading of this bond. C. The price will fall and the expected return...
An investor is an avid bond purchase. He requires a 5% return on his bond purchases,...
An investor is an avid bond purchase. He requires a 5% return on his bond purchases, yet, the bonds today currently yield 4% as a AA rated bond. How can he achieve a 5% return on his bond purchases in the future? Please explain also how he can reduce changes in bond prices that are part of his portfolio
discuss corporate bond interest in terms of cost of capital versus investor yields. Also, discuss municipal...
discuss corporate bond interest in terms of cost of capital versus investor yields. Also, discuss municipal bond interest in terms of investor yields.
An investor purchases a bond that does not pay a coupon (zero-coupon) with a face value...
An investor purchases a bond that does not pay a coupon (zero-coupon) with a face value of $5,000. Assume the bond’s 8.4% yield to maturity is expected to remain constant over the duration of the bond’s life. What is the rate of return on his investment, if he sells this bond ten years later? Group of answer choices Not enouh information to answer the question 4.20% 6.72% 5.04% 8.40%
An investor purchases a bond that does not pay a coupon (zero-coupon) with a face value...
An investor purchases a bond that does not pay a coupon (zero-coupon) with a face value of $5,000. Assume the bond’s 8.4% yield to maturity is expected to remain constant over the duration of the bond’s life. What is the rate of return on his investment, if he sells this bond ten years later? 4.20% 5.04% 8.40% Not enough information to answer the question 6.72%
question 1: Bond A is a municipal bond and Bond B is a corporate bond. Which...
question 1: Bond A is a municipal bond and Bond B is a corporate bond. Which bond should have the higher yield to maturity? QUESTION 2: Both A and B took out 30-year mortgages. A paid his off in 28 years. B paid hers off in 29 years. All else equal, who paid more interet? A OR B OR BOTH Question 4 Stock Standard Deviation Beta A 0.25 0.8 B 0.15 1.1 Which stock has the greatest total risk? A....
1a.An investor is in the 28 percent federal tax bracket. For this investor, a municipal bond...
1a.An investor is in the 28 percent federal tax bracket. For this investor, a municipal bond paying 4 percent interest is equivalent to a corporate bond paying ________ interest. A. 11.79 percent B. 10.17 percent C. 9.08 percent D. 9.68 percent E. 5.56 percent 1b. Which of the following situations would require a decrease in the coupon rate for a bond selling at par? A. The addition of a call provision B. The addition of a convertibility option C. The...
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT