Adequate information: Corporate bond yield is 7.68 % . The federal-plus-state-tax bracket of the investor is 25 % . To compute: The bond’s after-tax yield to the investor Introduction: One of the ways that businesses raise money is through the issuance of bonds. The yield on bonds refers to the amount of return that a bond's investor receives. There are many different forms of bond yields and the yield fluctuates along with the price.

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Chapter 6, Problem 1P

Summary Introduction

Adequate information:

Corporate bond yield is 7.68% .

The federal-plus-state-tax bracket of the investor is 25% .

To compute: The bond’s after-tax yield to the investor

Introduction: One of the ways that businesses raise money is through the issuance of bonds. The yield on bonds refers to the amount of return that a bond's investor receives. There are many different forms of bond yields and the yield fluctuates along with the price.

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Calculate the after-tax return of a(n) 5.625.62 percent, 20-year, A-rated corporate bond for an investor in the 1515 percent marginal tax bracket. Compare this yield to a(n) 3.683.68 percent, 20-year, A-rated, tax-exempt municipal bond, and explain which alternative is better. Repeat the calculations and comparison for an investor in the 3535 percent marginal tax bracket. Question content area bottom Part 1 The after-tax return of the 5.625.62%, 20-year, A-rated corporate bond for an investor in the 1515% marginal tax bracket is enter your response here%. (Round to two decimal places.) Part 2 Compare this yield to the 3.683.68%, 20-year, A-rated, tax-exempt municipal bond and explain which alternative is better. (Select the best answer below.) A. The after dash tax yield of 4.78 % for the corporate bond is a better alternative than the 3.68 % tax dash free municipal bondThe after-tax yield of 4.78% for the corporate bond is a better…