Calculate the after - tax return of a(n) 4.75 percent, 20-year, A -rated corporate bond for an investor in the 10 percent marginal tax bracket. Compare this yield to a(n) 4.22 percent, 20-year, A- rated, tax-exempt municipal bond, and explain which alternative is better. Repeat the calculations and comparison for an investor in the 35 percent marginal tax bracke
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Question content area top Part 1 Calculate the after - tax return of a(n) 4.75 percent, 20-year, A -rated corporate bond for an investor in the 10 percent marginal tax bracket. Compare this yield to a(n) 4.22 percent, 20-year, A- rated, tax-exempt municipal bond, and explain which alternative is better. Repeat the calculations and comparison for an investor in the 35 percent marginal tax bracket.
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- Question content area top Part 1 Calculate the after-tax return of a(n) 7.947.94 percent, 20-year, A-rated corporate bond for an investor in the 1010 percent marginal tax bracket. Compare this yield to a(n) 5.545.54 percent, 20-year, A-rated, tax-exempt municipal bond, and explain which alternative is better. Repeat the calculations and comparison for an investor in the 3535 percent marginal tax bracket. Question content area bottom Part 1 The after-tax return of the 7.947.94%, 20-year, A-rated corporate bond for an investor in the 1010% marginal tax bracket is enter your response here%. (Round to two decimal places.) Part 2 Compare this yield to the 5.545.54%, 20-year, A-rated, tax-exempt municipal bond and explain which alternative is better. (Select the best answer below.) A. The 5.54 % tax dash free municipal bond is a better alternative than the after dash tax yield of 7.15 % for the corporate bondThe 5.54% tax-free municipal bond is a…Calculate the after-tax return of a(n) 5.625.62 percent, 20-year, A-rated corporate bond for an investor in the 1515 percent marginal tax bracket. Compare this yield to a(n) 3.683.68 percent, 20-year, A-rated, tax-exempt municipal bond, and explain which alternative is better. Repeat the calculations and comparison for an investor in the 3535 percent marginal tax bracket. Question content area bottom Part 1 The after-tax return of the 5.625.62%, 20-year, A-rated corporate bond for an investor in the 1515% marginal tax bracket is enter your response here%. (Round to two decimal places.) Part 2 Compare this yield to the 3.683.68%, 20-year, A-rated, tax-exempt municipal bond and explain which alternative is better. (Select the best answer below.) A. The after dash tax yield of 4.78 % for the corporate bond is a better alternative than the 3.68 % tax dash free municipal bondThe after-tax yield of 4.78% for the corporate bond is a better…Calculate the after-tax return of a(n) 5.625.62 percent, 20-year, A-rated corporate bond for an investor in the 1515 percent marginal tax bracket. Compare this yield to a(n) 3.683.68 percent, 20-year, A-rated, tax-exempt municipal bond, and explain which alternative is better. Repeat the calculations and comparison for an investor in the 3535 percent marginal tax bracket.
- Taxable Equivalent Yield What's the taxable equivalent yield on a municipal bond with a yield to maturity of 10.00 percent for an investor in the 35 percent marginal tax bracket?MULTIPLE CHOICE Calculate the after-tax cost of debt under each of the following cases: (a) the interest rate is 10 percent, and the tax rate is 40 percent; (b) the interest rate is 11 percent, and the tax rate is 50 percent? A. (a)10% and (b)4.5%B. (a)5% and (b)5.5%C. (a)12% and (b)6.5%D. (a)6% and (b)5.5%E. None of the above4. Chapter MC, Section .03, Problem 106 A 7-year municipal bond yields 4.80%. Your marginal tax rate (including state and federal taxes) is 32.00%. What interest rate on a 7-year corporate bond of equal risk would provide you with the same after-tax return? (Round your final answer to two decimal places.) Oa. 7.06% Ob. 3.64% OC. 6.34% d. 3.26% e. 15.00% Save & Continue Continue without saving
- Problem 7-16 Comparing Bond Yields (LG7-6) A client in the 39 percent marginal tax bracket is comparing a municipal bond that offers a 4.5 percent yield to maturity and a similar- risk corporate bond that offers a 6.45 percent yield. Determine the equivalent taxable yield. Note: Round your answer to 2 decimal places. Which bond will give the client more profit after taxes? Equivalent taxable yield Which bond will give the client more profit after taxes? %Question content area top Part 1 Before-tax cost of debt Gronseth Drywall Systems, Inc., is in discussions with its investment bankers regarding the issuance of new bonds. The investment banker has informed the firm that different maturities will carry different coupon rates and sell at different prices. The firm must choose among several alternatives. In each case, the bonds will have a $1,000 par value and flotation costs will be $40 per bond. Calculate the before-tax cost of financing with the following alternative. (Click on the icon here in order to copy the contents of the data table below into a spreadsheet.) Coupon rate Time to maturity Premium or discount 11% 15 years $220You can invest in taxable bonds that are paying a yield of 9.4 percent or a municipal bond paying a yield of 7.65 percent. Assume your marginal tax rate is 21 percent. a. Calculate the after-tax rate of return on the taxable bond? (Round your answer to 2 decimal places. (e.g., 32.16)) b. Which security bond should you buy? a b. Rate of return The security bond one should buy is %
- Suppose your marginal federal income tax rate is 25 percent. 1. What is your after-tax return from holding a one-year corporate bond with a yield of 5.25 percent? (1 pt) 2. What is your after-tax return from a holding a one-year municipal bond with a yield of 4 percent? (1 pt) 3. How would you decide which bond to hold? (Assume that Both bonds carry the same risk.) (1 pt)Assume a municipal bond has a yield of 5.75% and corporate bond of comparable maturity and credit rating has a yield of 7%. For each marginal tax rate below calculate the after tax yield for the municipal bond and the corporate bond. Type your answer below as a percentage (not decimals): • 10% Muni: Corporate: • 20% Muni: Corporate: • 25% Muni: Corporate: • 30% Muni: Corporate:You can invest in taxable bonds that are paying a yield of 9.7 percent or a municipal bond paying a yield of 7.95 percent. Assume your marginal tax rate is 21 percent. a. Calculate the after-tax rate of return on the taxable bond? (Round your answer to 2 decimal places. (e.g., 32.16))b. Which security bond should you buy?
