Securities is best after adjusting for tax and credit risk

Assignment Help Financial Management

Reference no: EM13810280

You are given the following three money market securities:

A US T-bill offering a quoted yield of 6.75%;

A bank CD offering a quoted yield of 7.56%;

A MA Municipal bond offering a quoted yield of 4.25%;

You pay Federal tax at the rate of 32%, and the MA state tax at the rate of 6.25%. It is estimated that the US T-Bill has zero risk of default, the MA municipal has a 1.8% chance of default,and the back CD has a 2.3% chance of default. The quoted yield is before tax and credit risk adjustments, which of these three securities is best after adjusting for tax and credit risk?

a. Bank CD

b. T-Bill

c. MA Municipal

d. They are the same

e. cannot make decision

Reference no: EM13810280

Questions Cloud

Towers of hanoi problem : Solving the Towers of Hanoi Problem using State Space Search- There are 3 disks on peg A. The top disk has a diameter of 1, the middle disk has a diameter of 2, and the bottom disk has a diameter of 3

What is the firms total assets : Mandolin Bottlers Co. has net income of $4,272,335 and retains 65 percent of its income every year. If the company's internal growth rate is 8.6 percent, what is the firm’s total assets? (Round your answer to the nearest dollar.)

Statements about southeast : The beta of Southeast has been estimated to be 0.85. Which of the following statements about Southeast is FALSE?

Use a discount rate or required rate of return : Analysis suggests that Jumpda LLC will pay a bill with the probability of 23.00%. They want to order 2,000 boxes of kitty litter at a net price per box of $46.00. Each box costs your company $27.00. You believe that the buyer (Jumpda LLC) will be a r..

Securities is best after adjusting for tax and credit risk : You pay Federal tax at the rate of 32%, and the MA state tax at the rate of 6.25%. It is estimated that the US T-Bill has zero risk of default, the MA municipal has a 1.8% chance of default,and the back CD has a 2.3% chance of default. The quoted yie..

Invest an annual annuity : Sam invests the amount of $22,750 in the bank today and, in addition, starting a year from today, she will invest an annual annuity of $21,950 for 17 consecutive years. Which of the following comes closest to the value of these investments at the end..

Each mix should company prepare for the maximum revenue : A candy company has 111kg of chocolate- covered nuts and 69kg of chocolate- covered raisins to be sold as two different mixs. One mix will contain half nuts and half raisins and will sell for $7 per kg. The other mix contain 3/4 nuts and 1/4 raisins ..

Amount the should be invested in treasury bonds : A pension fund manager decides to invest a total of at most $45 million in U.S. Treasury bonds paying 5% annual interest and in mutual funds paying 9% annual interest. He plans to invest at least $5 million in bonds and at least $ 10 million in mutua..

Using the discounted payback criterion : Your task is to analyze two mutually exclusive projects: Using the payback criterion, which investment should you chose? Why? Using the discounted payback criterion, which investment should you chose? Why? Using the NPV criterion, which investment sh..

User Account

All Pages