Ask Question
16 December, 07:31

A municipal bondholder buys a 5 percent coupon annual payment muni bond at a price of $4,900. The bond has a $5,000 face value. In one year she sells the bond for $4,975. The appropriate capital gains tax rate is 15 percent and her ordinary income tax rate is 28 percent.

A. What is her after-tax rate of return?

+5
Answers (1)
  1. 16 December, 08:56
    0
    the after tax return on the investment is 6.40%

    Explanation:

    5% interest on the face value: 5,000 x 5% = 250 this interest are tax exempt.

    capital gain:

    4,975 - 4,900 = 75

    75 x 15% = 11.25

    net return: 75 - 11.25 = 63.75

    total return: 250 + 63.75 = 313.75

    investment 4,900

    313.75 / 4900 = 0,064030 = 6.40%
Know the Answer?
Not Sure About the Answer?
Get an answer to your question ✅ “A municipal bondholder buys a 5 percent coupon annual payment muni bond at a price of $4,900. The bond has a $5,000 face value. In one year ...” 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