6 problems from chapter 3 & 4 respectively. need to use HonorLock system to take

Question

6 problems from chapter 3 & 4 respectively. need to use HonorLock system to take this exam. e limit: 1 hour 45 minutes are allowed to have the following in the exam: ance calculator e letter size page of formulas only. No written theory material or solved numerical examples pty sheets of paper for solving problems. Question 41 4 pts A 5-year corporate bond yields 8.00%. A 5-year municipal bond of equal risk yields 65%. Assume that the state tax rate is zero. At what federal tax rate are you indifferent between the two bonds? (Round your final answer to two decimal places.) 21.38% 21.00% 20.25% 18.94% 18.75% Previous Next

Explanation / Answer

Muncipal bond = corporate bond ( 1 - tax)

6.5% = 8% ( 1 - 0.1875)

6.5% = 8% * 0.8125

6.5% = 6.5%

Therefore tax rate is 18.25%

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