Problem 4. Municipal Bonds 1 The interest on some municipal bonds is tax free, i

Question

Problem 4. Municipal Bonds 1 The interest on some municipal bonds is tax free, in contrast to the interest on corporate bonds. If the current annual interest rates on otherwise similar(i.e., maturity, credit risk, liquidity) municipal and corporate bonds are 1.48% and 1.80%, respectively, what is the implied tax rate? *Make sure to input all percentage answers as numeric values without symbols, and use four decimal places of precision. For example, if the answer is 6%, then enter 0.0600. Enter answer here

Explanation / Answer

For Municipal bonds, implied tax rate = 1.48% / 4% = 37%

For Corporate bonds, implied tax rate = 1.80% / 15% = 12%

Related Questions

Navigate

• Browse (All)
• Browse P
• Subjects

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