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Nina [5.8K]
3 years ago
14

Joe is considering 2 similar bonds, with the only difference that: (1) a tax-exempt municipal bond promises a 5.625% annual retu

rn, (2) a taxable corporate bond promises a 7.5% annual return. If Joe's tax rate is 25%, which bond should he buy?
a. Either one, both have the same after-tax yield
b. Municipal bond, as it has a higher after-tax yield
c. Corporate bond, as it has a higher after-tax yield
d. Not enough information is given to answer the question
Business
1 answer:
Dahasolnce [82]3 years ago
6 0

Answer:

a. Either one, both have the same after-tax yield

Explanation:

we have to calculate the after tax return of the bonds:

after tax return of corporate bonds = bond yield x (1 - tax rate) = 7.5% x (1 - 25%) = 7.5% x 0.75 = 5.625%

since municipal bonds are not included as part of Joe's gross income, their after tax rate is equal to their yield = 5.625%

both bonds yield the same after tax return = 5.625%

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3 years ago
what is the connection, if any, between comparative advantage (ca) and foreign direct investment (fdi)?
Yuliya22 [10]

CA has nothing to do with FDI. Countries often engage in FDI in industries where the country they invest in has a comparative disadvantage.

When a nation's businesses make investments abroad, it promotes comparative advantage CA in the same sector at home.

What is comparative advantage -

The ability to create goods and services at a lower opportunity cost, not necessarily at a higher volume or quality, is referred to as having a comparative advantage.

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1 year ago
The standards for product V28 call for 8.6 pounds of raw material that costs $19.00 per pound. Last month, 2,600 pounds of the r
aliina [53]

Answer:

A. $520 U

B.178 F

Explanation:

A.

Materials price variance = (AQ × AP) – (AQ × SP)

= $48,880 – (2,600 × $19)

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Therefore the material price variance for the month is $520U

B.

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