Answer:
Municipals must offer at least 6.30% yields.
Explanation:
Corporate bonds is a term used to describe a type of debt applied to securities that are issued by companies that wish to acquire funds to establish their investments and activities.
These resources can be acquired differently, but as these companies influence the local market with their activity, it is common for them to offer some after-tax income on corporate bonds.
In the case of the question above, this income is calculated as follows:
The after-tax yeld on the corporate bonds is: 0.095*(1-30) = 0.0630 = 6.30%
Answer:
0.0665 or 6.65%
Explanation:
The question is to determine the rate of tax yield that municipals must offer an investor in order for that investor to prefer them to investment in Corporate Bonds
First,
The investor's Tax Bracket is 30%
The Corporate Bond Offer is 9.5% yields
Therefore, the municipal Offer
= The Corporate Bond Offer x (1 - The Investor's tax bracket)
= 9.5% x (1 -30%)
=0.095 x (1-0.3)
=0.095 x 0.7
= 0.0665 or 6.65%
