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Alina [70]
3 years ago
14

Corporate bonds issued by Johnson Healthcare currently yield 8 percent. Municipal bonds of equal risk currently yield 6 percent.

At what tax rate would an investor be indifferent between these two bonds?
Business
1 answer:
Vedmedyk [2.9K]3 years ago
3 0

Answer:

a tax-rate for 25% will make the investor be indifferent between there two bonds

Explanation:

The Municipal bonds are tax free. Therefore, do not pay the income tax for their interest.

We need to set and equation for the net yield of the bonds after tax, which equal the municipal bond:

debt after tax:

cost of debt ( 1 - t) = after-tax

we want to equalize 8% pre-tax with 6% after-tax

0.08 ( 1 - t ) = 0.06

t = 1 - 0.06/0.08 = 1 - 0.75 = 0.25 = 25%

a tax-rate for 25% will make the investor be indifferent between there two bonds

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The population of Djibouti is approximately 830,000. To serve the communication needs of this nation, there are two FM radio sta
LenaWriter [7]

Answer:

C) economic infrastructure

<u><em>MISSING OPTIONS:</em></u>

A) gross national product (GNP) B) business cycle C) economic infrastructure D) standard of living E) gross domestic product (GDP)

Explanation:

These is not a description of how the people live (standard of lving) nor which are the main activities of the economy who drive them; neither the definition of governemetn spending or consuming thus, it isn't talking about the GNp or GDP

This is a description of how infrastructure is in the country with a focus in telecommunications as it refers to radio and television stations and spmarthphones available for the country.

6 0
3 years ago
Assume the Fed creates excess reserves in the banking system by buying government bonds, but banks do not make more loans becaus
seropon [69]

Answer: Cyclical asymmetry

Explanation:

In economics, Cyclical asymmetry is defined as

A value that represents a large imbalance in economic factors due to genuine cyclical reactions by a country or market.

It includes employment rates,  interest rates, debt retention, bond strengths, or stock market imbalances.

If we assume the Fed creates excess reserves in the banking system by buying government bonds, but banks do not make more loans because economic conditions are bad.

Since this happens due to the cyclical reaction of the government.

This means that,

This situation is a problem of <u>cyclical asymmetry</u>.

8 0
3 years ago
Some of the following future cash flows have been expressed in then-current (future) dollars and others in CV dollars. Use an in
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Answer:

$62,267.91

Explanation:

first we must calculate the interest rate = 10% + 6% + (10% x 6%) = 16.6%

now we can use the present value formula:

present value = future value / (1 + rate)ⁿ

present values for:

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total present value = $62,267.91

6 0
3 years ago
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∴ <em>The capital gain will be $6000 i.e. (50000 - 44000) and $0 basis.</em>

4 0
3 years ago
An economics student makes the following​ statement: ​"It's easy to understand why the aggregate demand curve is downward​ slopi
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Answer:

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