Another benefit of the BAB program is that the direct subsidy increased efficien

Question

Another benefit of the BAB program is that the direct subsidy increased efficiency: in the traditional muni market, the lost federal taxes exceeded the lower borrowing costs of state and local governments. In June 2010, the State of Virginia, (AAA rated credit) issued $143 million 30-year to maturity BABs. The issue had a taxable rate of 4.70%. At the time, the yield on the 30-year AAA Municipal Market Index (tax-exempt) was 4.25% (this index is representative of the market for AAA rated tax-exempt munis). c. What is the net borrowing cost to the State of Virginia? Is this greater or less than the borrowing cost of a typical AAA issuer on the tax-exempt market (given by the yield on the AAA Municipal Market Index)? Why does this make sense?

Explanation / Answer

REFER TO:

https://docs.google.com/viewer?a=v&q=cache:LKr9hPICbaAJ:www.mma-research.com/mma/nonmembers/Advisor/advisor.pdf+&hl=en&gl=in&pid=bl&srcid=ADGEESgXw0KniZNJabI9smHeVY7tpmVOe7ITMQVnbYaUSVwAMMq4gc-AoOs_gJKPYAQDgLBF8vNyfMLuigvJQGv2aeTpuH1ggpGBbuPX8VBEcEhe-KZVKkxHfj_PHE6iKHF6bRTngZPw&sig=AHIEtbSQSvs-ESl5k7ZE46rl1h4rlkSvzQ

www.jct.gov/publications.html?func=startdown&id=3797

https://www.nabl.org/uploads/cms/documents/ACT_Report.pdf

www.slcdocs.com/budget/bookFY12.pdf

www.invesco.com/pdf/VK-HYM-PC-1.pdf

ANSWER:

The foreclosure crisis drags on. And the Occupy movement

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