What must municipals offer for the investor

Reference no: EM13202315

Present equations, all steps of calculations, and the answers in a Word document formatted in the current APA style.

1. A municipal bond carries a coupon rate of 63/4;% and is trading at par. What would be the equivalent taxable yield of this bond to a taxpayer in a 35% tax bracket?

2. Suppose that short-term municipal bonds currently offer yields of 4%, while comparable taxable bonds pay 5%. Which gives you the higher after-tax yield if your tax bracket is:

a. Zero
b. 10%
c. 20%
d. 30%

3. An investor is in a 30% combined federal plus state tax bracket. If corporate bonds offer 9% yields, what must municipals offer for the investor to prefer them to corporate bonds?

Reference no: EM13202315

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