A taxable bond has a yield of 8.50% and a municipal bond has a yield of...

A taxable bond has a yield of 8.50% and a municipal bond has a yield of 5.95%. At what tax rate would you be indifferent between the two bonds (i.e., the rate where the returns on the two bonds are equal)?

	a.	40.00 percent
	b.	25.00 percent
	c.	35.00 percent
	d.	30.00 percent

North Side Corporation is expected to increase dividends at 10 percent rate each year over the next three years. Afterward, the company pledges to maintain a constant 6 percent growth rate in dividend forever. If the required return on the stock is 11 percent, what is the current share price given the company’s most recent dividend was $2?

Expert Solution

jeff jeffy answered 3 years ago

Find the equivalent taxable yield of the municipal bond for tax brackets of zero, 10%, 20%,...

Find the equivalent taxable yield of the municipal bond for tax brackets of zero, 10%, 20%, and 30%, if it offers a yield of 3.30% Tax Brackets a.Zero % = b.10% % = c.20% = d.30% % =

If you are holding a municipal bond that is trading at par to yield 6%, by...

If you are holding a municipal bond that is trading at par to yield 6%, by how much will your after-tax yield change if your federal income tax bracket increases from 15% to 20%. Assume there are no state or local taxes

5. Suppose the interest rate on a taxable corporate bond is 4 percent while a municipal,...

5. Suppose the interest rate on a taxable corporate bond is 4 percent while a municipal, tax exempt bond has an interest rate of 3 percent, and they are similar in every other way. a. Assuming the income tax rate is 30 percent, calculate the after tax interest rate on the corporate bond. Is it higher or lower than the after tax return on the municipal bond? b. What is the income tax rate that equalizes the after tax return...

Suppose a municipal bond offers a yield to maturity of 5% and a same maturity corporate...

Suppose a municipal bond offers a yield to maturity of 5% and a same maturity corporate bond offers a 4% yield. For which values of the marginal tax rate an investor would prefer to buy the corporate bond? A. The investor would prefer to buy the corporate bond if she faces a marginal tax rate greater than 40%. B. The investor would prefer to buy the corporate bond if she faces a marginal tax rate lower than 20%. C. The...

A municipal bond you are considering as an investment currently pays a yield of 6.82 percent....

A municipal bond you are considering as an investment currently pays a yield of 6.82 percent. a. Calculate the tax equivalent yield if your marginal tax rate is 28 percent. b. Calculate the tax equivalent yield if your marginal tax rate is 21 percent.

1. A "MOB" is calculated as difference between the yield on municipal bond minus U.S. treasury...

1. A "MOB" is calculated as difference between the yield on municipal bond minus U.S. treasury bond of the same maturity. This spread is an example of a a. Maturity spread b. Quality spread c. Time spread d. Calendar spread 2. Which of the following debt instruments are considered less risky than U.S. treasuries? a. Corporate Bonds b. Municipal Bonds c. Both of the above d. None of the above 3. Which of the following is NOT a theory explaining...

To answer questions, assume “All else equal” 13. A municipal bond must have a yield to...

To answer questions, assume “All else equal” 13. A municipal bond must have a yield to maturity that is higher/lower/equal to the yield to maturity on a similar corporate bond. 14. An investment has a 3% rate which compounds quarterly, therefore it must have an EAR that higher than/lower than/equal to an investment that has a 1% rate which compounds monthly. 15. An investment has a 3% rate which compounds quarterly, therefore it must have an APR that higher than/lower...

After-tax Yield. You need to choose between investing in a one-year municipal bond with a 0.01...

After-tax Yield. You need to choose between investing in a one-year municipal bond with a 0.01 yield and a one-year corporate bond with an 0.09 yield. If your marginal federal income tax rate is 0.22 and no other differences exist between these two securities, which one would you invest in? For the answer, enter the after-tax yield that you will ultimately get once you choose the best bond. Enter the answer as a decimal using 4 decimals (e.g. 0.1234).

Recently the national average yield on municipal bonds has been  = 4.19% with a standard...

Recently the national average yield on municipal bonds has been  = 4.19% with a standard deviation of ?= 1.15%. A random sample of 16 Arizona municipal bonds had an average yield of 5.11%. Does this indicate that the population mean yield for all Arizona municipal bonds is greater than the national average? Use a 5% level of significance. Assume ? is normally distributed. STEP 1: State the null and alternate hypotheses and the level of significance. Is the test...

Suppose currently 10-year Treasury bond yields 1.2% and 10-year municipal bond offers 0.8% yield. Also, your...

Suppose currently 10-year Treasury bond yields 1.2% and 10-year municipal bond offers 0.8% yield. Also, your federal income tax rate is 40% and state income tax rate is 14%. Calculate the risk premium (spread) of this municipal bond. Show calc and steps

Question