tacey faces a 15% tax rate on interest income. She can buy a $100 face value corporate bond yielding 12.5% ($12.5) annually for $100 or a municipal bond yielding $12.5 annually. Both bond issues have similar maturities and risk. How much is she willing to pay for the municipal bond?
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Stacey faces a 15% tax rate on interest income. She can buy a $100 face value corporate bond yielding 12.5% ($12.5) annually for $100 or a municipal bond yielding $12.5 annually. Both bond issues have similar maturities and risk. How much is she willing to pay for the municipal bond?
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- Hui is currently considering investing in municipal bonds that earn 3.64 percent interest, or in taxable bonds issued by the Coca-Cola Company that pay 5.20 percent. Required: a. If Hui's tax rate is 22 percent, which bond should he choose?Hui is currently considering investing in municipal bonds that earn 8.40 percent interest, or in taxable bonds issued by the Coca- Cola Company that pay 11.00 percent. Required: If Hui's tax rate is 22 percent, which bond should he choose? Which bond should he choose if his tax rate is 32 percent? At what tax rate would he be indifferent between the bonds? What strategy is this decision based upon?Anne's marginal income tax rate is 32 percent. She purchases a corporate bond for $10,000 and the maturity. or face value, of the bond is $10,000. If the bond pays 5 percent per year before taxes, what is Anne's annual after-tax rate of return from the bond if the bond matures in 1 year? What is her annual after-tax rate of return if the bond matures in 10 years? NOTE: Round your answers to 1 decimal place. AFTER-TAX RATE: a) Bond matures in 1 year: ___________% b) Bond matures in 10 years: ____________%
- David has the option to invest in one of the following Town of Elmdale bond that pays 6% interest annually Town of Schitt's Creek bond that pays 6.5% interest annually Prada corporate bond that pays 7% interest annually Gucci corporate bond that pays 6% interest annually David anticipates that his marginal rate will be 10%. Which investment should he choose from tax perspective? a.Group of answer choices b.Prada bond c.Elmdale bond d.Schitt's Creek bond e. Gucci bondHui is currently considering investing in municipal bonds that earn 8.55 percent interest, or in taxable bonds issued by the Coca-Cola Company that pay 11.40 percent. Required: If Hui's tax rate is 22 percent, which bond should he choose? Which bond should he choose if his tax rate is 32 percent? At what tax rate would he be indifferent between the bonds? What strategy is this decision based upon?Melinda invests $200,000 in a City of Heflin bond that pays 6 percent interest. Alternatively, Melinda could have invested the $200,000 in a bond recently issued by Surething Inc. that pays 8 percent interest and has risk and other nontax characteristics similar to the City of Heflin bond. Assume Melinda's marginal tax rate is 25 percent. a) What is her after-tax rate of return for the City of Heflin bond? b) How much explicit tax does Melinda pay on the City of Heflin bond? c) How much implicit tax does she pay on the City Heflin bond? d) How much explicit tax would she have paid on the Surething, Inc. bond? e) What is her after-tax rate of return on the Surething Inc. bond?
- Isona has owned a $10,000, 10-year bond for 4 years and is considering selling it. If it has a bond rate of 4% annually, Isona paid $9,100 for it originally, and she wants an 9% annual yield, how much should she charge for the bond?Mildred can purchase a municipal bond with a par (face) value of $1000 that will mature in 10 years. The bond pays 6% interest compounded quarterly. If she can buy this bond for $1050, what rate of return will she earn?You decide to invest $27,000 in a municipal bond that earns 6.15% and is federally tax free. Your tax rate is 28%, how much have you effectively earned after ten years, assuming annual compounding? (Hint: must use two formulas to solve this question) In other words, because you are not paying taxes how much have you effectively earned?
- Candy has $70,000 to invest and wants an annual return of $2800, which requires an overall rate of return of 4%. She can invest in a safe, government-insured certificate of deposit, but it pays only 2%. To obtain 4%, she agrees to invest some of her money in noninsured corporate bonds paying 7%. How much should be placed in each investment to achieve her goal?Jane Doe earns $41,400 per year and has applied for a(n) $89,000, 25-year mortgage at 7 percent interest, paid monthly. Property taxes on the house are expected to be $3,900 per year. If her bank requires a gross debt service ratio of no more than 30 percent, will Jane be able to obtain the mortgage? Is Jane eligible for the loan?Whitney recently retired, and has $450,000 in savings. She wants to invest as much as possible in a safe CD account paying 1.1% interest, and as little as possible in a riskier bond paying 5.6% interest. She needs to earn $16,200 a year in interest to cover expenses above SSI. How much should she invest in each account?$ in the CD at 1.1%$ in the bond at 5.6%