Rondo corporation bonds-municipal bonds

Reference no: EM13972678

1. Maysa is considering making an investment in municipal bonds yielding 4%. What would the yield on a taxable bond have to be to provide a higher after-tax return than the municipal bond if Maysa is in a 35% marginal tax rate bracket?

2. Return to the facts of problem. Assume that Maysa bought $5,000 par value of Rondo Corporation bonds for $4,500. The bonds pay 8% interest annually. Three years later, the price of the bonds has increased to $6,200. Maysa can purchase munic- ipal bonds yielding 5.5%. Should she sell the Rondo Corporation bonds and buy the municipal bonds?

Reference no: EM13972678

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