Question: PLEASE HELP PLZ ANSWER ASAP PLZ The information will be used for the two questions. You, as an investor, are comparing two bonds: a corporate
PLEASE HELP PLZ ANSWER ASAP PLZ
The information will be used for the two questions. You, as an investor, are comparing two bonds: a corporate and a municipal. They both have a face value (par) of $1,000 and a 5-year term to maturity. The corporate bond has an 8% annual coupon and an 8.5% yield to maturity. The municipal bond has a 6% coupon and a 5.5% yield to maturity. Please calculate the Price of the corporate bond.
1) Assume you have a 35% tax rate, what is the after-tax coupon payment that you will receive.
2) What is you after-tax return on the corporate?
Using expectations theory: You observe that there is a one-year Treasury bond with a yield of 2.0%. You also assume that rates will be going up and that the one-year bond will go up by 0.5% each year. As an example, you expect the one-year bond in year 2 will be 2.5% and 3% in year 3. 1) With that information, what do you expect the 3-year interest rate to be?
2) What rate do you expect a 5 year bond to have?
Step by Step Solution
There are 3 Steps involved in it
Get step-by-step solutions from verified subject matter experts
