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1 a)Katie paid $9,400 for a corporate bond with a par value of $10,000 and a coupon rate of 6.5%. She holds the bond for 2 full years and then sells the bond for $9,700. Since Katie is in the 25% marginal tax bracket, how much tax will she have paid during the time she held the bond? (Ignore Long-term
b)Tim has an opportunity to buy a $1,000 par value bond with a coupon rate of 7% and a maturity of 5 years. If Tim requires a 9% return on his investments, what is the most he would pay for this bond?
C)Mark has a portfolio of bonds worth $30,000. They are all 6% bonds with a maturity in 15 years. New bonds are currently selling at a rate of 8%. How much money can Mark expect to receive on the sale of his bonds?
d)You previously purchased a $1,000 bond, with a coupon rate of 5%. If comparable bonds are currently selling at a coupon rate of 4%, which is the current market value of your bond?
e)Last year you purchased a 15 year bond at 98 with a coupon rate of 5%. The current market rate is 3%. If you sold your bond today, what would be your total return on your investment (ignore taxes)?
f)Julio purchased a $1,000 corporate bond with a 4% coupon rate. The bond is currently quoted at 106.
1. What is the current price of the bond?
2. Given the current
g)Bernie purchased 20 bonds with par values of $1,000 each. The bonds carry a coupon rate of 9% payable semiannually. How much will Bernie receive for his first interest payment?
h)You previously purchased a $1,000 bond, with a coupon rate of 5%. If comparable bonds are currently selling at a coupon rate of 4%, which is the current market value of your bond?
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1You previously purchased a $1,000 bond, with a coupon rate of 5%. If comparable bonds are currently selling at a coupon rate of 4%, which is the current market
1f)Julio purchased a $1,000 corporate bond with a 4% coupon rate. The bond is currently quoted at 106.
a. What is the current price of the bond?
b. Given the current
1You previously purchased a $1,000 bond, with a coupon rate of 5%. If comparable bonds are currently selling at a coupon rate of 4%, which is the current market
1f)Julio purchased a $1,000 corporate bond with a 4% coupon rate. The bond is currently quoted at 106.
a. What is the current price of the bond?
b. Given the current
- At the beginning of his current tax year, David invests $12,400 in original issue U.S. Treasury bonds with a $10,000 face value that mature in exactly 15 years. David receives $520 in interest ($260 every six months) from the Treasury bonds during the current year, and the yield to maturity on the bonds is 3.2 percent. Note: Round your intermediate calculations to the nearest whole dollar amount. Problem 7-35 Part-a (Algo) a. How much interest income will he report this year if he elects to amortize the bond premium? Semiannual Period 1 2 Yearly Total Adjusted Basis of Bond at Interest Premium Beginning of Received Amortization Semiannual Period Reported Interest b. How much interest will he report this year if he does not elect to amortize the bond premium? Interest Reportedarrow_forwardAnne'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: ____________%arrow_forwardRachel owns 100 percent of a gift shop with an equity value of $150,000. If she keeps the shop open 5 days a week, EBIT is $75,000. If the shop remains open 6 days a week, EBIT increases to $92,000 annually. Rachel needs an additional $50,000 which she can raise today by either selling stock or issuing debt at an interest rate of 7 percent. The principal amount would be repaid in equal annual payments at the end of the next five years. Ignore taxes. What will be the cash flow for the year to Rachel if she issues debt, remains open 5 days a week, and distributes all the residual cash flow to the shareholders? Multiple Choice $46,125 $61,500 $65,000 $71,500 $67,880arrow_forward
- You bought a 5-year property class equipment for $20,000.00 and sold it after 3 years. Assume that the selling price of the equipment decreases uniformly by 5% each year. The equipment generated following income: $5,000, $5,500, and $4,500 in years 1 through 3, respectively. 5. Fill up the table below to show the after tax cash flow. Assume that you are already in the 28% income tax bracket. Use MACRS depreciation. Assume that depreciation recapture/loss is taxed at 15%. After tax cash flow Yr. Income Depreciation Таxable Income Income Тах b) Write down the equation to determine the after tax rate of return. DO NOT compute the rate of return.arrow_forwardIf Tom invests $45,000 in a taxable corporate bond that provides a 9 percent before-tax return, how much will Tom's investment be worth in either 8 or 20 years from now when the bond matures? Assume Tom's marginal tax rate is 35 percent.arrow_forwardes Problem 3-59 (LO 3-5) (Algo) Helen holds 1,700 shares of Fizbo Incorporated stock that she purchased 11 months ago. The stock has done very well and has appreciated $35/share since Helen bought the stock. When sold, the stock will be taxed at capital gains rates (the long-term rate is 15 percent and the short-term rate is the taxpayer's marginal tax rate). Ignore the time value of money. Required: a. If Helen's marginal tax rate is 35 percent, how much would she save by holding the stock an additional month before selling? b. What might prevent Helen from waiting to sell? Complete this question by entering your answers in the tabs below. Required A Required B If Helen's marginal tax rate is 35 percent, how much would she save by holding the stock an additional month before selling? Tax savingsarrow_forward
- 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 bondarrow_forwardSuppose you are28 and married. You and your spouse file for income taxes jointly. You are in the 25% tax bracket. You are considering a few personal investment issues. Which one of the followings is likely to be the best investmentinyour 401 (k) account? _____ a. Municipal bonds b. 1-year Treasury notes c. Stock mutual funds d .Annuitiesarrow_forward
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