What is taxable equivalent yield on municipal bond

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Reference no: EM131955915

1. A stock pays a yearly dividend of $1 and it is expected to grow by 5% per year forever. If the stock is currently priced at $50, what is the market rate of return?

2. Your new job entitles you to one free $1 donut each morning. If you expect doughnuts to increase in price by 5% per year, and the interest rate is and always will be 10%, then how much do you value this benefit? Assume you expect to live forever and you will work every day. Assume there are 365 days in a year and you have just finished your breakfast.

3. What's the taxable equivalent yield on a municipal bond with a yield to maturity of 4.8 percent for an investor in the 33 percent marginal tax bracket? (Round your answer to 2 decimal places.)

Reference no: EM131955915

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