question archive 1) Suppose that short-term municipal bonds currently offer yields of 4%, while comparable taxable bonds pay 5%
1) Suppose that short-term municipal bonds currently offer yields of 4%, while comparable taxable bonds pay 5%
Subject:AccountingPrice: Bought3
1) Suppose that short-term municipal bonds currently offer yields of 4%, while comparable taxable bonds pay 5%. Which gives you the higher after-tax yield if your tax bracket is:
a. Zero b. 10% c. 20% d. 30%
12. Find the equivalent taxable yield of the municipal bond in the previous problem for tax brackets of zero, 10%, 20%, and 30%.
13. Which security should sell at a greater price?
a. A 10-year Treasury bond with a 9% coupon rate or a 10-year T-bond with a 10% coupon.
b. A three-month maturity call option with an exercise price of $40 or a three-month call on the same stock with an exercise price of $35.
c. A put option on a stock selling at $50 or a put option on another stock selling at $60. (All other relevant features of the stocks and options are assumed to be identical.)
