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    This post addresses tax yields and related issues.

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    1. Do investors in high tax brackets or those in low tax brackets benefit more from tax-exempt securities?
    2. Do municipal bonds or corporate bonds offer a higher before-tax yield at a given point in time? Which has the higher after-tax yield?
    3. If taxes did not exist, would Treasury bonds offer a higher or lower yield than municipal bonds with the same maturity?

    © BrainMass Inc. brainmass.com December 24, 2021, 10:29 pm ad1c9bdddf
    https://brainmass.com/business/accounting/post-addresses-tax-yields-related-issues-481604

    SOLUTION This solution is FREE courtesy of BrainMass!

    1. Investors in high tax brackets would benefit more from tax-exempt securities than those in low tax brackets. The investors in high tax brackets have a higher tax liability, and the tax-exempt security would not add to their already high liability. They would benefit the most from any tax-exempt security. The investors in the low tax bracket would benefit but not to the same extent because they do not have as much income to try and offset with non-taxable securities and other non-taxable income.

    2. Corporate bonds offer a higher before-tax yield at a given point in time because they are subject to federal tax, however the municipal bonds would have a greater tax yield for investors in the higher tax brackets compared to those in lower tax brackets. The corporate bonds offer a higher before tax yield because they are taxed by the federal government, whereas the municipal bonds are not subject to the same federal tax.

    3. If taxes did not exist, Treasury bonds would offer a lower yield because there is no tax (since they don't exist) and the Treasury bonds are offered by the government. The Treasury bonds would therefore be an investment with no risk, which would make the municipal bonds riskier as an investment than the Treasury bonds. Any investment with absolutely zero risk would cause an increase in demand for the security and a decrease in demand for other securities with the same maturity.

    This content was COPIED from BrainMass.com - View the original, and get the already-completed solution here!

    © BrainMass Inc. brainmass.com December 24, 2021, 10:29 pm ad1c9bdddf>
    https://brainmass.com/business/accounting/post-addresses-tax-yields-related-issues-481604

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