Question

Please discuss corporate bond interest in terms of cost of capital versus investor yields. Also, discuss municipal bond interest in terms of investor yields.

Answer #1

Please discuss corporate bond interest in terms of cost of capital
versus investor yields. Also, discuss municipal bond interest in
terms of investor yields.
N.B
please discuss substantially

Explain corporate bond interest in terms of cost of capital
versus investor yields. Also, explain the municipal bond interest
in terms of investor yields.

Explain corporate bond interest in terms of cost of capital
versus investor yields. Also, explain the municipal bond interest
in terms of investor yields.

An investor in the 35 percent tax bracket may purchase a
corporate bond that is rated A and yields 6.0 percent. The investor
may also buy an A-rated municipal bond with a 3.9 percent yield.
Why may the corporate bond be preferred? (Assume that the terms of
the bonds are the same.)

An investor is attempting to decide between the purchase of a
tax-free municipal bond or a corporate bond. She is in the 32% tax
bracket (rate). A municipal bond yields 2.2% interest and a
corporate bond yields 3.1% interest. Which should she purchase?
Please state the reason.

An investor is in the 28 percent federal tax bracket. For this
investor, a municipal bond paying 4 percent interest is equivalent
to a corporate bond paying ________ interest.

answer for part a, and b
Suppose the interest rate on a taxable corporate bond is 4
percent while a municipal, tax exempt bond has an interest rate of
3 percent, and they are similar in every other way.
a. Assuming the income tax rate is 30 percent, calculate the
after tax interest rate on the corporate bond. Is it higher or
lower than the after tax return on the municipal bond?
b. What is the income tax rate that...

A municipal bond pays interest rate of 4%. A corporate bond of
similar risk and maturity pays interest rate of 5%. An investor
with a marginal tax rate of 30% will
a. Choose the municipal bond
b. Choose the corporate bond
c. Be indifferent between the two bonds
d. Invest 50:50 in the two bonds
The following data pertain to Debry Company for 2017 and 2018.
The company reported net income of $120,000 during 2018.
Depreciation expense was $25,000. Calculate...

Investor A has just sold a ten-year $10,000 corporate bond to
Investor B for $8,500. Investor A purchased the bond four years ago
for $9,500. The bond coupon rate is 8 percent per year paid
annually and Investor A has just received the dividend for year
4.
a) Draw the cash flow diagram for Investor A
b) Calculate the Rate of Return for Investor A
c) Draw the cash flow diagram for Investor B
d) Investor B has a MARR...

In terms of corporate finance, please explain the importance of
capital structure and give examples.

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