Suppose that your marginal tax rate is20%.Your after-tax return from holding (to maturity) a one-year corporate bond
Question:
Suppose that your marginal tax rate is20%.Your after-tax return from holding (to maturity) a one-year corporate bond with a yield to maturity of 15% is nothing%.(Round your response to the nearest whole number).Suppose your marginal income tax rate is35%. If a corporate bond pays 5%, then the interest rate that an otherwise identical municipal bond have to pay in order for you to be indifferent between holding the corporate bond and the municipal bond is nothing%.(Round your response to the nearest whole number).
In which of the following situations would you choose to hold the corporate bond over the municipal bond, assuming that corporate and municipal bonds have the same maturity, liquidity, and default risk?
Financial management theory and practice
ISBN: 978-0324422696
12th Edition
Authors: Eugene F. Brigham and Michael C. Ehrhardt