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You pay federal income taxes at a 28 percent marginal tax rate. You have the choice of buying either a taxable corporate bond paying 7.10 percent coupon interest or a similar maturity and risk municipal bond paying 5.90 percent coupon interest.
a. Which bond offers the higher after tax yield?
b. If you also pay a state income tax on taxable coupon interest at a 9 percent rate, but no tax on municipal interest, which bond offers the higher after tax yield?
Although you are young, you are already thinking about retirement. You have decided you want to retire in 25 years from now. You want to live on a retirement of $90,000 per year. You figure you will live about 45 years on that retirement (you work-ou..
A firm decides to use debt to raise its return on equity. It currently has sales of $2 million, total assets of $1 million and a debt ratio of 20%. It's net profit margin has been 10% and it expects it to stay there into the future. If it borrows an ..
Which statement about bond prices is most accurate?
A 5-year corporate bond has an 8 percent yield. A 10-year corporate bond has a 9 percent yield. The two bonds have the same default risk premium and liquidity premium. The real risk-free rate, r*, is expected to remain constant at 3 percent. Inflatio..
Analyse the current financial state of Anthony's Orchard and evaluate the impact of a major customer cancelling their expected order.
What is the difference of WACC based on market value weights and book weights - Please show formulas.A balance sheet shows a total of noncallable $45 million.
Describe the basic strategy in riding the yield curve. Can you ride the yield curve if the yield curve is downward sloping with short term rates above long term rates?
A $1,000 corporate bond with 10 years to maturity pays a coupon of 8% (semi-annual) and the market required rate of return is a) 7.2% and b) 10%. What is the current selling price for a) and b)? Worked this many ways by many suggestions and I am not ..
Yang Corp. is growing quickly. Dividends are expected to grow at a rate of 29 percent for the next three years, with the growth rate falling off to a constant 7.8 percent thereafter. Required: If the required return is 15 percent and the company just..
write an explanatory note on otcei
You want to buy a car, and a local bank will lend you $30,00. The loan will be fully amortized over 5 years (60 months), and the nominal interest rate will be 10% with interest paid monthly. what will be the monthly loan payment? What will be the loa..
Jamaica Tours, Inc., started the year with a balance of retained earnings of $1,780 million. The company reported net income for the year of $284 million and paid dividends of $17 million to the preferred stockholders and $59 million to common stockh..
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