Ask Question
BusinessBusiness
31 January, 01:37

An investor is in a 40% combined federal plus state tax bracket. If corporate bonds offer 10.25% yields, what yield must municipals offer for the investor to prefer them to corporate bonds?

+2
Answers (1)
  1. 31 January, 05:03
    0
    Municipal should offer at least 6.15 % after tax yield to the investor prefer them to corporate bond

    Explanation:

    We have given yield rate of corporate bond = 10.25%

    Tax rate for investor = 40 %

    Actual yield earned by investor will be equal to = yield rate of corporate bond * (1 - tax rate of investor)

    = 0.1025 (1 - 0.40)

    = 0.1025 * 0.60

    = 0.0615

    For converting in percentage we have to multiply with 100

    So actual yield earned by investor will be equal to 6.15 %

    So municipal should offer at least 6.15 % after tax yield to the investor prefer them to corporate bond
Know the Answer?
Not Sure About the Answer?
Get an answer to your question ✅ “An investor is in a 40% combined federal plus state tax bracket. If corporate bonds offer 10.25% yields, what yield must municipals offer ...” in 📙 Business if there is no answer or all answers are wrong, use a search bar and try to find the answer among similar questions.
Search for Other Answers
You Might be Interested in
The cost of capital used in capital budgeting should reflect the average cost of the various sources of investor-supplied funds a firm uses to acquire assets. T/F
Answers (1)
The financial statements of the Darlington Company report net sales of $500,000 and accounts receivable of $40,000 and $20,000 at the beginning of the year and end of year, respectively. What is the accounts receivable turnover for Darlington?
Answers (1)
The adjusting entry to record an accrued expense includes a debit to: a. an expense account and a credit to a liability account. b. an expense account and a credit to a revenue account. c. a liability account and a credit to a revenue account. d.
Answers (1)
Gillie, Taft, and Dall are partners in an accounting firm. The partnership agreement is silent about the payment of salaries and the division of profits and losses. Gillie works full-time in the firm, and Taft and Dall each work half-time.
Answers (2)
In the context of the competitive environment of business, unlike leading-edge firms, bleeding-edge firms offer products just as the market becomes ready to embrace them. a. True b. False
Answers (1)
New Questions in Business
Euphrasia, a mixed open economy, was severely affected by a recession that almost paralyzed its service sector. The Euphrasian government announced a fiscal stimulus package of $15,000 billion to boost economic growth.
Answers (1)
Soar Incorporated is considering eliminating its mountain bike division, which reported an operating loss for the recent year of $4,000. The division sales for the year were $1,058,000 and the variable costs were $861,000.
Answers (1)
The cost of the next best choice in a trade-off is called the
Answers (1)
The voucher system of control is designed to control cash disbursements and the acceptance of obligations. 1. the voucher system of control establishes procedures for
Answers (1)
Data for January for Bondi Corporation and its two major business segments, North and South, appear below: Sales revenues, North $ 587,000 Variable expenses, North $ 340,600 Traceable fixed expenses, North $ 70,200 Sales revenues, South $ 453,200
Answers (1)
Home » Business » An investor is in a 40% combined federal plus state tax bracket. If corporate bonds offer 10.25% yields, what yield must municipals offer for the investor to prefer them to corporate bonds?
Sign Up Forgot Password?