(1)An investor is in the 25% marginal income-tax bracket. What is the taxable eq

Question

(1)An investor is in the 25% marginal income-tax bracket. What is the taxable equivalent yield of a municipal bond with a yield to maturity of 2.8% for this investor? (A)11.2% (B)3.73% (C)2.10% (D)0.70%

(2)A bond with 7 years left to maturity has a 5% coupon rate and is priced at $1,045.80. What is its yield to maturity? (assume a $1,000 par value and semiannual interest payments) (A)5.00% (B)2.12% (C)4.24% (D)2.5%

(3)What is the payback statistic for a project with yearly cash flows of -10,000; 2,500; 3,500; 5,000; 4,000; 2,000 when the company faces a 10 percent cost of capital? (A)2.8 years (B)3.56 years (C)3.0 years (D)8.2 years

Explanation / Answer

1. B

2. B

3. C

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