Two money market securities

Assignment Help Financial Management

Reference no: EM131920370

Ye Yuan is in retirement and is considering investing in one of the following two money market securities:

A US Treasury Bill offering 6.95%

A Massachusetts Municipal bond offering 4.99%

Ye pays Federal tax at the rate of 27% and tax to the state of Massachusetts (his state residency) of 9%.

Ye estimates that the US Treasury Bill has zero risk of default, and that the Massachusetts municipal bond has a 1% chance of default.

Because the quoted yield is before tax and credit risk adjustments, Ye is interested in determining which of these two bonds is best. How much more (or less) in yield does the Treasury Bill offer after adjusting for tax and credit risk? If the believe that the Treasury Bill is best, then enter the differential as a positive number. If you believe the municipal is best, then enter the differential as a negative number.

Difference in yield = %

Place your answer as a percent without the percentage sign. For example, if your answer is zero point six three percent, then enter your answer as 0.63

Reference no: EM131920370

Questions Cloud

How can you interpret the coefficient estimate : Explain the relationship between the coefficient estimates in the table and the average wage rates of males and females - the Gauss-Markov conditions

European call option expiring at the end of period : Using the BOPM, determine the equilibrium price of an XYZ 35 European call option expiring at the end of the period.

Should business people take the social consequences : To what extent do you feel that a U.S. company doing business in another country should "Do as the Romans do"

Develop algorithms to manipulate collections : Develop algorithms to manipulate collection(s), with evaluated algorithm quality. You must use effective algorithms as studied in class.

Two money market securities : Ye Yuan is in retirement and is considering investing in one of the following two money market securities:

Compute the total cost of ordering and carrying flour : The bakery uses an average of 4,500 bags a year. Preparing an order and receiving a shipment of flour involves a cost of $10 per order.

What is average daily float : In a typical month, the Webber Corporation receives 100 checks totaling $67,000. What is the average daily float?

What problems are caused by the allocation of overhead : What problems are caused by the allocation of overhead? In your judgment, which of the problems associated with the allocation of overhead are overcome

Why you would recommend the managerial solution : The administrative challenge is budget cuts for a tri-county community action network. Students must prepare a two page single space memo to the Executive.

User Account

All Pages