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Question 1:
Assume that Larry's marginal tax rate is 25%. If corporate bonds pay 7.4% interest, what interest rate would a municipal bond have to offer for Larry to be indifferent between the two bonds?
Multiple Choice
a) 25.00%
b) 9.25%
c) 7.40%
d) 5.55%
e) None of the choices are correct.
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- Assume that Larry's marginal tax rate is 24 percent. If corporate bonds pay 10 percent interest, what interest rate would a municipal bond have to offer for Larry to be indifferent between the two bonds? O 24.00 percent O 12.00 percent O 10.00 percent O 7.60 percent O None of the choices are correct.An investor is trying to decide between a muni paying 5.75% or an equivalent taxable corporate paying 8.25%. What is the minimum marginal tax rate the investor must have to consider buying the municipal bond? A. 30.00% B. 25.00% C. 66.67% D. 20.00%In order for you to be indifferent between the after-tax returns on a corporate bond paying 9% and a tax-exempt municipal bond paying 7%, what would your tax bracket need to be? A. Cannot be determined from the information given. B. 17.6% C. 27% D. 19.8% E. 22.2%
- 4) An investor purchases one municipal and one corporate bond that pay rates of return of 7.5% and 10.3%, respectively. If the investor is in the 24% marginal tax bracket, what will be his or her after-tax rates of return on the municipal and corporate bonds?C) Suppose that the interest rate on a taxable corporate bond is 9% and that the marginal tax is 28%. Suppose a tax-free municipal bond with a rate of 6.75% was available. Which security would you choose?An investor is trying to decide between a muni paying 6.20 percent or an equivalent taxable corporate paying 8.25 percent. What is the minimum marginal tax rate the investor must have to consider buying the municipal bond? Group of answer choices 20.0 percent 66.7 percent 80.0 percent 25.0 percent 75.0 percent
- Suppose your marginal federal income tax rate is 25 percent. 1. What is your after-tax return from holding a one-year corporate bond with a yield of 5.25 percent? (1 pt) 2. What is your after-tax return from a holding a one-year municipal bond with a yield of 4 percent? (1 pt) 3. How would you decide which bond to hold? (Assume that Both bonds carry the same risk.) (1 pt)An investor is trying to decide between a muni paying 6.20 percent or an equivalent taxable corporate paying 8.25 percent. What is the minimum marginal tax rate the investor must have to consider buying the municipal bond? 20.0 percent 66.7 percent 80.0 percent 25.0 percent 75.0 percent15) If the municipal bond rate is 6% and the corporate bond rate is 9%, what is the marginal tax rate, assuming investors are indifferent between the two bonds?
- An investor purchases one municipal and one corporate bond that pay rates of return of 6% and 8%, respectively. If the investor is in the 24% marginal tax bracket, his or her after-tax rates of return on the municipal and corporate bonds would be ________ and ______, respectively. A) 6%; 8% B) 4.5%; 6% C) 4.5%; 8% D) 6%; 6.08%Please provide justificationIf the cost of debt for Sohar Textiles is 8.9% (effective rate) and the after-tax cost of debt is 0.057, what is the tax rate? Select one: a. All the given choices are not correct b. 0.360 c. 0.146 d. 1.640 e. 0.0329) In order for you to be indifferent between the after-tax returns on a corporate bond paying 7% and a tax-exempt municipal bond paying 5.5%, what would your tax bracket need to be? A) 22.6% B) 21.4% C) 26.2% D) 19.8% E) Cannot be determined from the information given. Please provide accurate answer with justification.