A municipal bond you are considering as an investment currently pays a 6.80 perc

Question

A municipal bond you are considering as an investment currently pays a 6.80 percent annual rate of return.

Calculate the tax equivalent rate of return if your marginal tax rate is 28 percent.

Calculate the tax equivalent rate of return if your marginal tax rate is 21 percent.

A municipal bond you are considering as an investment currently pays a 6.80 percent annual rate of return.

Calculate the tax equivalent rate of return if your marginal tax rate is 28 percent.

Calculate the tax equivalent rate of return if your marginal tax rate is 21 percent.

Explanation / Answer

tax equivalent rate of return = annual rate / (1-tax rate) = 6.80%/(1-0.28) = 9.44%

b) tax equivalent rate of return = 6.80%/(1-0.21) = 8.608%

Related Questions

Navigate

• Browse (All)
• Browse A
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.