Require stead to ked your after-tax real yield

Assignment Help Financial Management

Reference no: EM13872147

Several years ago, a Texas bank offered a thirty-year CD with an annual return indexed to inflation. The rate offered was the annual percentage increase in the CPI plus 4 percent. Suppose that you are in the 28 percent marginal tax bracket and require a 5 percent real return after taxes. Suppose also that the annual inflation rate last year was 3 percent, so this year's annual rate on the CD investment is set at 7 percent.

a. Show the after-tax real return you would earn, assuming that the inflation rate stays at 3 percent and the CD rate offered is 7 percent.

b. What ex ante nominal rate should you require stead to ked your after-tax real yield at 5 percent?

Reference no: EM13872147

Questions Cloud

Compute the amount of goods available for sale : Compute the amount of goods available for sale, ending inventory, and cost of goods sold at January 31 under each of the following inventory costing methods. Of the four methods, which will result in the highest gross profit? Which will result in the..

Anchored barge that extends across a canal : Canal effect figure shows an anchored barge that extends across a canal by distance d = 30m and into the water by distance b = 12m. The canal has a width D = 55m, & water depth H = 14m, and a uniform water-flow speed vi = 1.5m/s.

The bonds make semi-annual payments : Cross fade co issued 13 year bonds two years ago at a coupon rate of 9.3 percent. The bonds make semi-annual payments. If these bonds currently sell for 106 percent par value, what is the YTM?

Balloons of a thin but tough plastic : Suppose we construct these balloons of a thin but tough plastic having a density such that each square meter has a mass of 5.00 g. We inflate them with a very light gas whose mass we can neglect

Require stead to ked your after-tax real yield : Several years ago, a Texas bank offered a thirty-year CD with an annual return indexed to inflation. The rate offered was the annual percentage increase in the CPI plus 4 percent. Show the after-tax real return you would earn, assuming that the infla..

What actions the dlbc should address avoiding or mitigating : what actions the DLBC should address avoiding or mitigating

All members participate and creatively present their ideas : All members are required to participate and to creatively present their ideas, reflections or critical commentary. Groups are expected to address the key themes and incorporate examples from lectures, class discussions, and assigned readings.

Considering four mutually exclusive public-works projects : Tempe is considering four mutually exclusive public-works projects. Their costs and benefits are presented in the table below. Each project has a useful life of 50 years and the MARR is 12% per year. Which of the projects, if any, should be selected?..

Compute the gross profit percentage for each year : Restate the partial income statements to reflect the correct amounts, after fixing the inventory error. Compute the gross profit percentage for each year (a) before the correction and (b) after the correction, rounding to the nearest percentage. Do t..

User Account

All Pages