Purchase Solution

After Tax Yield of Bond:

Not what you're looking for?

Ask Custom Question

An investor recently purchased a corporate bond which yields 9%. The investor is in the 36% combined federal and state tax bracket. What is the bond's after tax yield?

Purchase this Solution
Solution Summary

Explains how to calculate the after tax yield of bond

Purchase this Solution
Free BrainMass Quizzes
Marketing Management Philosophies Quiz

A test on how well a student understands the basic assumptions of marketers on buyers that will form a basis of their marketing strategies.

Accounting: Statement of Cash flows

This quiz tests your knowledge of the components of the statements of cash flows and the methods used to determine cash flows.

Transformational Leadership

This quiz covers the topic of transformational leadership. Specifically, this quiz covers the theories proposed by James MacGregor Burns and Bernard Bass. Students familiar with transformational leadership should easily be able to answer the questions detailed below.

Balance Sheet

The Fundamental Classified Balance Sheet. What to know to make it easy.

Cost Concepts: Analyzing Costs in Managerial Accounting

This quiz gives students the opportunity to assess their knowledge of cost concepts used in managerial accounting such as opportunity costs, marginal costs, relevant costs and the benefits and relationships that derive from them.

View More Free Quizzes
Related BrainMass Solutions

  • Yield on Bonds

    Therefore after tax yield on municipal bond = before tax yield on the bond= 5.50% Corporate Bond: Marginal Tax rate T = 28% Before tax yield= kd= 8.00% (Yield to maturity) After tax yield= kd(1-T)= 5.76% =(

  • After-tax yield: Municipal vs. Corporate Bonds

    Question A After-tax yield = Yield*(1-tax rate) =8%*(1-34%) = 5.28% Question B Indifference rate level = Municipal bond yield/(1-tax rate)= 6%/(1-34%)= 9.09% This rate will result to an after-tax yield of 6% which is equal to the municipal bond

  • Computing After-tax Equivalent Yield

    After-tax yield = Before-tax yield*(1-tax rate) After-tax yield = .09*(1-.28) After-tax yield =.09*.72 After-tax yield = .0648 You would want to earn 6.48 percent on the municipal bond.

  • After Tax Yield and Tax Liability

    The bonds after tax yield is given as Pre tax yield X (1-tax rate) After Tax Yield = 9% X (1-0.36) = 9%X0.64=5.76% Personal After-Tax Yield 2. Corporate bond issued by Johnson Corporation currently yield 8 percent.

  • Evaluating investment in bonds

    After Tax Return = Yield X (1-tax rate) After Tax return = 10% X (1-0.20) = 8% The municipal bond is tax free and so the after tax yield is the same as 8.5%. Municipal bond is a better buy as it has a higher after tax return.

  • Bond Analysis: Muni Bond Yield

    The yield on the muni bond should be the same as the after tax yield on the corporate bond for the investor to be indifferent since in this case the yield is the same on both (the muni bond is tax free) After tax yield = before tax yield X (1-tax rate

  • Which investment has the highest yield

    Corporate Bond After tax return = Before tax yield X (1-tax rate) = 8% X (1-0.5) = 4% b. Municipal Bond A municipal bond is exempt from tax and so the after tax return would be same as the yield which is 5.5% c.

  • After tax cost of debt

    Yield to maturity= 10.40% Tax rate= 25% After tax cost of debt= interest rate x (1- Tax rate)= 7.80% =10.4%*(1-25.%) Answer: After tax cost of debt= 7.80%

  • Principles of Finance Class (Lovell Co. and State of Pennsylvania bond issuance)

    A bond issued by the State of Pennsylvania provides a 9 % yield. What yield on a Synthetic Chemical bond would cause the two bonds to provide the same after tax rate of return to an investor in the 36 percent tax bracket?

View More Related Solutions