What are their pre-tax yields

Reference no: EM131304538

Suppose that, holding yield constant, investors are indifferent as to whether they hold bonds issued by the federal government or bonds issued by state and local governments (that is, they consider the bonds the same with respect to default risk, information costs, and liquidity). Suppose that state governments have issued perpetuities (or consols) with $75 coupons and that the federal government has also issued perpetuities with $75 coupons. If the state and federal perpetuities both have after-tax yields of 8%, what are their pre-tax yields? (Assume that the relevant federal income tax rate is 39.6%.)

Reference no: EM131304538

Questions Cloud

What obstacles was robert banes facing in receiving care : What obstacles was Robert Banes facing in receiving care for his health problems? What help was available for him?

Why the financial crisis have been difficult to foresee : Why might the financial crisis have been difficult to foresee, even by people working in high-level positions in the financial system?

Why would the spread increase as a result of moody’s action : What is "the spread between Greece and Germany"? Why would the spread increase as a result of Moody's action?

Difference between retail and institutional cash flow : Compare the difference between retail and institutional cash flow to money market funds. How do they differ? Why do you think they differ?

What are their pre-tax yields : If the state and federal perpetuities both have after-tax yields of 8%, what are their pre-tax yields? (Assume that the relevant federal income tax rate is 39.6%.)

Does a bank have to be insolvent to experience a run : What is a financial crisis?- What is a bank run? Does a bank have to be insolvent to experience a run?- What is contagion? What is the connection between contagion and a bank panic?

How do organizations create opportunitiy for illegal conduct : How do organizations create opportunities for illegal conduct?Identify the external factors that impact corporate crime. Describe Karl Marx's theory of crime as it relates to white collar crime. Discuss the limitations of the Marxist theory.

Historical context of immigration in the jamiaca plain : Write about the historical context of immigration in the Jamiaca Plain, Boston MA. Mention the History of immigration in that area and why it attracts so many people.

Why did he consider this term to be more appropriate : Explain why, in your opinion, Jefferson chose to change "property" into "the pursuit of happiness"? Why did he consider this term to be more appropriate for the American Declaration of Independence? ?Think about this from multiple perspectives.

User Account

All Pages