Answer:
The answer is letter D.
Explanation:
It is reasonable to expect that the cyclical unemployment rate has been unaffected.
Based on the information given, the corporate bond will be recommended for Mr. Brown while the municipal bond will be recommended for Mr Black.
<u>Mr Brown:</u>
The after-yield tax on corporate bonds will be:
= Before tax yield × (1 - tax rate)
= 4% × (1 - 0.10)
= 3.60%
After tax yield on municipal bond will be:
= 3.5% × 1 = 3.5%
The corporate bond is recommended.
For <u>Mr. Black</u>
The after-yield tax on corporate bonds will be:
= 4% × (1 - 0.35)
= 2.60%
The after-yield tax on municipal bonds will be:
= 3.5% × 1
= 3.5%
Therefore, the municipal bond is recommended.
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Answer:
option (A) $86
Explanation:
Data provided in the question:
Coupon rate = 6%
Face value of bonds = $1,000
Purchasing price (i.e the selling percentage at the time of purchase )
= 98.6% of par
Selling price = 101.2% of par
Thus,
Annual Coupon payment = Face value × Coupon rate
= $1,000 × 6%
= $60
Now,
Purchase price = $1,000 × 98.60%
= $986
Sales price = Face value of bonds × Selling price
= $1,000 × 101.20%
= $1,012
Therefore,
Total dollar Return
= Sales price + Annual Coupon payment - Purchase price
= $1,012 + $60 - $986
= $86
Hence,
The correct answer is option (A) $86
Answer:
Option D, stock d with a beta equal to 2.0, is the right answer.
Explanation:
Option D has the highest risk because the magnitude of beta represents the risk involved or associated with the stock. So, higher the beta magnitude, higher is the risk associated with stock and higher is the return. While lower value shows the lower risk and lower return on the stock. Therefore, option D has the highest magnitude so this stock has the highest risk.
