User Account

All Pages

Maximum after-tax returns

Assignment Help Finance Basics
Reference no: EM131910135

Maria Lopez is a wealthy investor who's looking for a shelter. Maria is in the maximum (35%) federal tax bracket and lives in a state with a very high income tax. (she pays the maximum of 11 ½% in state income tax) Maria is currently looking at 2 municipal bonds, both of which are selling at par. One is a AA-rated in-state bond that carries a coupon of 6?%. The other is a AA-rated out-of-state bond that carries a 7?% coupon. Her broker has informed her that comparable fully taxable corporate bonds are currently available with yields of 9¾%. Alternatively, long Treasuries are now available at 9%. She has $100,000 to invest, and because all the bonds are high-quality issues, she wants to select the one that will give her maximum after-tax returns. Show your detailed work.

Reference no: EM131910135

Questions Cloud

Merchandise transactions for the month of january : Ferris Company began 2018 with 4,000 units of its principal product. The cost of each unit is $7. Merchandise transactions for the month of January 2018.
What would the result be if mattel chose to remain unhedged : What would the result be if Mattel chose to remain unhedged? Show how you arrived at your answer with numbers. Is this result certain or risky?
What would you estimate the stock price to be : If shares in a similar company have an average return of 14%, what would you estimate the stock price to be?
Possibility of completing one or both projects : Gas Station A is paid back in 2 years; CF1 in year 1, and CF2 in year 2. Gas Station B is paid back in one (1) year. According to the payback period
Maximum after-tax returns : She has $100,000 to invest, and because all the bonds are high-quality issues, she wants to select the one that will give her maximum after-tax returns.
Calculate cash flow from the sale of machine : You are in a 30% tax bracket and will be able to sell the machine for $50,000 at the end of year four. Calculate your cash flow from the sale of this machine.
What was net income for the most recent four quarters : What was net income for the most recent four quarters?What was the closing price for this stock that appeared in yesterday's paper?
How much does a basis point equal : How much does a basis point equal? How many basis points are there between six- and five-eighths percent and six- and three-quarters percent?
What is the dollar amount of income : If London needs to have a total return of 0.24 during the year, then what is the dollar amount of income that she needed to have to reach her objective?

Reviews

Write a Review

Finance Basics Questions & Answers

  Recommending balanced scorecard to bp board

Barrel Products Plc (BP) is an international energy company, providing its customers with fuel for transportation, energy for heat and light, and petrochemical products for everyday items.

  Selecting two project if cost of capital is given

Project B involved an investment of $ 300.00 and was expected to have cash inflows of $ 100.00 each over its 5 year economic life.

  What were the total costs of the issue

In addition, the underwriter charges $600,000 in legal fees. On the first day of trading, the firm's stock closed at $61. What were the total costs of the issue?

  How you intend to ensure the organizations vision mission

write a proposal of no more than 750 words outlining the research approach you will use for your strategic plan due in

  Wat is the annual return on his investment convert this

mr. darden sold his house for 165000. he bought it for 55000 nine years ago. what is the annual return on his

  What are the basic requirements for the project plans

This was quick and easy, but it has its shortcomings, and the Earned Value Management process is said to be better.

  What is the one-year forward rate for the period beginning

How does the liquidity premium theory of the term structure of interest rates differ from the unbiased expectations theory?  In a normal economic environment, that is, an upward- sloping yield curve, what is the relationship of liquidity premiums for..

  What are the key determinants of value

What are the Key determinants of value, or value drivers, for Baidu?

  How would you refute the claim

If you were a company faced with such a claim, how would you refute the claim? If you were the claimant, how would you support your claim?

  What is the natural position of a gold miner

How would a gold miner hedge her position if gold prices are expected to drop steadily over the years? Show using pay off diagrams.

  What is the basic determinant of tax status in a merger

Merger and Taxes Describe the advantages and disadvantages of a taxable merger as opposed to a tax-free exchange. What is the basic determinant of tax status in a merger? Would an LBO be taxable or nontaxable? Explain.

  What is the risk premium on a stock with a beta

The Elvis Alive Corporation, makers of Elvis memorabilia, has a beta of 2.35. The return on the market portfolio is 13%, and the risk-free rate is 7%. According to CAPM, what is the risk premium on a stock with a beta of 1.0?

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

Submit Assignment

Academics

Major Subjects

Majors

Get In Touch

whatsapp: +1-415-670-9521

Phone: +1-415-670-9521

Email: [email protected]

TERMS & POLICIES

HELP & SUPPORT

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd