Reference no: EM13890176
Consider the following yields on bonds with approximately 20 years to maturity:
Issuer Yield Tax Status
New York City Transitional Finance Authority 3.272% Tax Exempt Muni
State of Illinois Build America Bond (BAB) 6.691% Taxable
State of Connecticut General Obligation (GO) 3.695% Tax Exempt Muni
Verizon Communications (corporate bond) 5.460% Taxable
Calculate the taxable equivalent yields of the tax exempt municipal bonds for the following marginal tax rates: 10%, 15%, 28%, 35%. For which of these tax rates will an investor prefer the NYC Transitional Finance Authority bond to the State of Illinois Build American Bond? To the Verizon Communications bond? For which of these tax rates will an investor prefer the State of Connecticut bond to the State of Illinois Build America Bond? To the Verizon Communications bond?
Given your answer in part a., why would an investor ever buy the NYC Transitional Finance Authority bond rather than the Illinois BAB or the Verizon Communications bond?
What is the marginal tax rate for which an investor is indifferent between the Verizon Communications bond and the NYC Transitional Finance Authority bond? What is the marginal tax rate for which an investor is indifferent between the Verizon Communications bond and the Connecticut General Obligation bond?
A New York City investor is trying to decide between the NYC Transitional Finance Authority bond and the Connecticut General Obligation bond. The investor is subject to a marginal federal income tax rate of 39.6%, and is subject to a 12% marginal tax rate for New York City and State income tax. Calculate the taxable equivalent yield of each bond for this investor. Everything else equal, which bond will this investor prefer?
A Connecticut investor is trying to decide between the Connecticut General Obligation bond and the New York City Transitional Finance Authority bond. The investor is subject to a marginal federal income tax rate of 39.6%, and is subject to an 6.5% marginal tax rate for Connecticut income tax. Calculate the taxable equivalent yield of each bond for this investor. Everything else equal, which bond will this investor prefer?
Given your answers to parts d. and e., explain the attraction of municipal bonds for investors that reside in the state of issue.
|
What is the change in bond price
: A 6.10 percent coupon bond with ten years left to maturity is priced to offer a 7.2 percent yield to maturity. You believe that in one year (aka 9), the yield to maturity will be 7.0 percent. What is the change in price the bond will experience in do..
|
|
Trader opens a margin account
: A trader opens a margin account and purchases 500 shares of Google at $40 per share. The initial margin requirement is 50%. If price increases to $50 per share, how many more shares she can buy by borrowing more from her broker?
|
|
Money invested in telemetry medical instruments
: You have been employed by Telemetry Medical Instruments (TMI) for seven years and participate in their 401 (k) plan by having 5% of your paycheck invested in the plan. What does prudent investment management suggest that you do about risk?
|
|
Summarizing how you intend to solve the problem - health
: Write a 300-word paper summarizing how you intend to solve the problem selected below. Select a personal problem from the list below: Finances, Health and Employment
|
|
Taxable equivalent yields of tax exempt municipal bonds
: Consider the following yields on bonds with approximately 20 years to maturity: Calculate the taxable equivalent yields of the tax exempt municipal bonds for the following marginal tax rates: 10%, 15%, 28%, 35%. For which of these tax rates will an i..
|
|
How much should she set aside today for the purchase
: Three years from now, Barb will purchase a laptop that will cost 2,250. Assume that Barb can earn 6.25% (compounded monthly) on her money. How much should she set aside today for the purchase? Round off to the nearest $10.
|
|
How much money must you put in a savings account today
: If you want to have $875 in 32 months, how much money must you put in a savings account today? Assume that the savings account pays 16% and it is compounded monthly (round to the nearest $10).
|
|
Recommend buying or renting-rental costs-annual costs
: Based on the following data, would you recommend buying or renting? Rental Costs- Annual costs- Annual rent $7,380, Insurance $145. Security deposit $ 650. - Buying Costs- Annual mortgage payments $9,800 ($9,575 is interest), Property taxes $ 1,780, ..
|
|
Certainty to investors in the floating rate note
: Consider the auction of 2-year Floating Rate Notes in April 2014. As we saw in class, the notes are priced at par and investors receive face value at maturity. Coupon interest payments are indexed to the 13-week T-bill and are made quarterly (July, O..
|