Purchase Solution

Tax Exempt Securities

Not what you're looking for?

Ask Custom Question

Who are the principal owners of tax-exempt securities? How has this changed over time? What are the main factors in the decisions of the different types of owners about increasing or reducing their holdings of tax-exempt securities?

Purchase this Solution
Solution Summary

The solution discusses the ownership of tax exempt securities, how it has changed over time and the the main factors in the decisions of the different types of owners about increasing or reducing their holdings of tax-exempt securities.

Solution Preview

Who are the principal owners of tax-exempt securities?

The largest owners of tax-exempt securities are individuals, mutual and money market funds, property and casualty insurance companies, and commercial banks.

How has this changed over time?
(source:http://www.morganstanleyindividual.com/markets/bondcenter/school /prudentpath.pdf).
Individual investor ownership in municipal bonds- either directly or through investments in bond funds-has increased dramatically since 1986. (The year of the Tax Reform Act of 1986)
Today, over 75% of the outstanding supply of municipal bonds and notes, which are tax free securities, is owned by the individual investors, as opposed to institutional and corporate investors. This percentage was less than 50% in 1986.

The Tax Reform Act of 1986 imposed alternative minimum tax to generate federal tax revenue. It imposed this ...

Purchase this Solution
Free BrainMass Quizzes
Economics, Basic Concepts, Demand-Supply-Equilibrium

The quiz tests the basic concepts of demand, supply, and equilibrium in a free market.

Pricing Strategies

Discussion about various pricing techniques of profit-seeking firms.

Basics of Economics

Quiz will help you to review some basics of microeconomics and macroeconomics which are often not understood.

Economic Issues and Concepts

This quiz provides a review of the basic microeconomic concepts. Students can test their understanding of major economic issues.

Elementary Microeconomics

This quiz reviews the basic concept of supply and demand analysis.

View More Free Quizzes
Related BrainMass Solutions

  • Tax-exempt securities

    15096 Tax-exempt securities Who are the principal owners of tax-exempt securities? How has this changed over time?

  • This post addresses tax yields and related issues.

    481604 This post addresses tax yields and related issues. 1. Do investors in high tax brackets or those in low tax brackets benefit more from tax-exempt securities? 2.

  • Equating Taxable and Tax-Exempt Security Yields

    To match this after-tax yield, you would consider taxable securities that pay ? Investors must pay income tax on their taxable interest.

  • Reggie White, Jack the Treasurer, Cash Manager Ken

    If the net yield of the taxable securities is greater than the tax exempt yield of the municipal security, then Jack should invest in the taxable securities Question 2C The equivalent after tax yield of the taxable security is 5% for Jack to be indifferent

  • Corporate After Tax Yield, Cash Flow

    Shrieves's corporate tax rate is 35 percent, and 70 percent of the dividends received are tax exempt.

  • Characteristics that affect security yield

    Investors concerned with lowering their tax bracket, the focus is sometimes place on tax-exempt securities. The tax-exempt securities offer situations where the tax savings from tax-exempt is greater than the tax savings of higher end investments.

  • The Shrieve Corporation: After-Tax Returns; Ludwig Corporation Stock; Tysseland Company: Capital Structure

    Shrieve's corporate tax rate is 35%, and 70% of the dividends received are tax exempt. Find the after-tax returns on both securities.

  • Municipal Bonds

    Therefore, the equivalent taxable yield of the tax exempt municipal note = tax free rate / (1-tax rate) Thus, if the yield on municipal note is 6.6%, the yield on taxable security has to be greater than 6.6% / (1-0.34) = 10%, in order for it to be more

  • Which security to purchase

    The issuing municipality is not in the same state as Reggie's company, but he recognizes that the muni's interest is exempt from federal income taxation. His company's marginal federal tax rate is 39%.

View More Related Solutions