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Calculate the net after-tax return on the nonqualified

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Reference no: EM132973937

Forever Savings Bank also purchases municipal bonds issued by the city of Richmond. Currently the bank is considering a nonqualified general obligation municipal issue. The bonds, which mature in 15 years, provide a nominal annual rate of return of 9.75 percent. Forever Savings Bank has the same cost of funds and tax rate as stated in the previous problem.

Question a. Calculate the net after-tax return on this nonqualified municipal security.

Question b. What is the difference in the net after-tax return for this qualified security versus the nonqualified municipal security?

Question c. Discuss the pros and cons of purchasing the nonqualified rather than the bank-qualified municipal described in the previous problem

Reference no: EM132973937

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