Assume you are in the 35 percent tax bracket and purchase a municipal bond with a yield of 5.75 percent. Use the formula presented in chapter 11 of your textbook to calculate the taxable equivalent yield for this investment. (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.) Taxable equivalent yield
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- 7. Comparing Taxable and Tax-Free Yields. With a 28 percent marginal tax rate, would a tax-free yield of 7 percent or a taxable yield of 9.5 percent give you a better return on your savings? Why? ADV V71. -- nere to search 17 40 101 %23 3. $4 4 7. 986Comparing Taxable and Tax-Free Yields. With a 28 percent marginal tax rate, would a tax-free yield of 7 percent or a taxable yield of 9.5 percent give you a better return on your savings? Why?Using the following expected interest payments, cost of debt = 5%, and tax-rate = 21%, calculate the TAX SHIELD. Expected interest year 1 = 50; year 2 = 35; year 3 = 20; year 4 = 10; 5 = 0 a) 101.36 b) 46.37 c) 158.33 d) 82.85
- Using the following expected interest payments, cost of debt = 5%, and tax-rate = 21%, calculate the TAX SHIELD. Expected interest year 1 = 50; year 2 = 35; year 3 = 20; year 4 = 10; 5 = 0 Group of answer choices 101.36 158.33 82.85 46.37With a 28 percent marginal tax rate, would a tax-free yield of 7 percent or a taxable yield of 11.0 percent give you a better return on your savings?What is the investment objective for a client who is 57 years old and planning to retire in 5 years? Select one: O a Preservation of capital and income. b. Growth. O c Developing a savings plan. Od. Preservation of capital. A PPN is issued with a NAV of $22.00, and is redeemed at $28 a month before maturity. Calculate the amount of tax per unit tha an investor in a 30% marginal tax bracket will owe at redemption. Select one: O a $0.90 Ob. $1.20 Oe $1.80 Od. $0.60 Which of the following institutions are not buy-side institutions? Select one: O a Trusts O b. Endowments Oc. Pension funds Od. Full-service dealers
- To find the after-tax interest rate, the before tax interest rate is multiplied by If the current and expected future one-year interest rates are 5%, 6%, 7%, using the expectations theory of the term structure, the three-year interest rate is ___? If the current and expected future one-period interest rates are 5%, 6%, 7%, 5% and 5%, and the liquidity premium is 0.4%, the five-period interest rate is A steep yield curve indicates that interest rates are expected to future. in the An inverted yield curve may be due to a Federal Reserve policy of increasing short- term interest rates to fight what economic problem?Using the same data for 2 parts: Using the following expected interest payments, cost of debt = 5%, and tax-rate = 21% Expected interest year 1 = 50; year 2 = 35; year 3 = 20; year 4 = 10; 5 = 0 Part A) Discount the year 4 expected payment back to time 0 (today). a) 9.31 b) 10.11 c) 13.65 d) 6.50 Part B) Calculate the Tax Shield a) 101.36 b) 46.37 c) 158.33 d) 82.85Answer each of the following independent questions. Ignore personal income taxes. Use Appendix A for your reference. (Use appropriate factor(s) from the tables provided.) Required: 1. Suppose you invest $4,100 in an account bearing interest at the rate of 10 percent per year. What will be the future value of your investment in five years? 2. Your best friend won the state lottery and has offered to give you $11,600 in four years, after he has made his first million dollars. You figure that if you had the money today, you could invest it at 8 percent annual interest. What is the present value of your friend’s future gift? 3. In four years, you would like to buy a small cabin in the mountains. You estimate that the property will cost you $68,500 when you are ready to buy. How much money would you need to invest each year in an account bearing interest at the rate of 4 percent per year in order to accumulate the $68,500 purchase price? 4. You have estimated that your educational expenses…
- The interest of a compound interest investmeut or loan can be computed with the formula 1-A-P. The end amount of a compound interest investment or loan can be computed with the formula A- P(1. The total percentage rate oe total retum of a simple interest investment or loan can be computed with the fonmala Laterest 100 Principal Use these foemulas to evaluate the aonts indicated below Chloe investa 15, 000 at a compound iaterest ate of 8 compounded monthly for 5 yesrs Deteine the total amot she will receive fros her ivestment at e end of 5 years Chloe will eceive a total of S the enl of 5 years Pevin dllars Detarine the istanet she will reoeive fe le vestnt athe end of5 years Choe will receiveS at he ted of 5 y Pview dllan D l p ag e ba tla nle otahe ond of5 years Cloes eet wil o tal Satentltiveo be inal ame the cnd of S yourUsing the following expected interest payments, cost of debt = 5%, and tax-rate = 21%, calculate the TAX SHIELD. %3D Expected interest year 1 = 50; year 2 35; year 3 = 20; year 4 10; 5 = 0 %3D !! %3! O 101.36 O 158.33 82.85 O 46.37Consider the decision of whether to hold wealth as money or as an interest-earning asset that pays a nominal rate of 6%. If you hold wealth as an interest-earning asset, you will have (1000/1060/1030/970) in wealth at the end of the year. If you hold the wealth as money, you will have (1000/1060/1030/970) in wealth at the end of the year. Holding wealth as an interest-earning asset therefore gives you (6%/ 3%) more purchasing power than you would have if you held the wealth as money. This illustrates that the relevant interest rate for calculating opportunity cost of holding wealth as money is the (real/nominal) interest rate. Now consider the decision of whether to spend your wealth today or hold it as an interest-earning asset to spend in a year. Again, assuming inflation is stable at 3%, the purchasing power of €1,000 held as an asset with a nominal rate of 6% will be (1000/1060/1030/970) in one year, compared to the (1000/1060/1030/970) in purchasing power you…