Posts Tagged ‘investing’
Corporate Bonds Tax Exempt
April 30th, 2011
Question: Corporate and tax-exempt municipal bond rates?
"If average corporate bond and tax-exempt municipal bonds rates were 7.25% and 5.95% respectively, at what marginal tax rate would an investor be indifferent between the two?"
I have applied the formula: im = it(1-t)
5.95%/7.25% = 1-t
then t = 1- (5.95%/7.25%) = 17.93%
I don't know whether I got it right b/c I don't have any illustrated problem like this, just the formula. However, the homework problems page contains this one.
Is there anybody who has some idea about this. Your help will be highly appreciated.
Answer: Looks good to me. Marginal rates above that are common for middle to upper class people.
Investment Strategies: High Grade Corporate and Tax Exempt Bonds Look Attractive
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Corporate Bonds Interest Rates
February 8th, 2011
Question: Why are interest rates for T-bills and corporate bond rates are less correlated?
While for CDs and T-bills, the interest rates are correlated.
Answer: Corporate Bonds are subject to default risk. T-bills are risk free from default. And bank CD's are insured.
Rising Interest Rates and Bonds