Suppose that xtel currently is selling

Finance Investment Help

Suppose that short-term municipal bonds currently offer yields of 4%, while comparable taxable bonds pay 5%. Which gives you the higher after-tax yield?
ST municipal bond yield
Taxable bond yield
Solution
After-Tax Yield = Rate on the Taxable Bond x (1 － Tax Rate)
Tax bracket After tax yield on taxable bond Higher yield
a. 0.00%
b. 0.00%
c. 0.00%
d. 0.00%
2-18
Turn to Figure 2.8 (listed below) and look at the listing for General Dynamics. a. What was the firm’s closing price yesterday? b. How many shares could you buy for $5,000? c. What would be your annual dividend income from those shares? d. What must be General Dynamics’ earnings per share?
Close
Net Chg
Div
Yield
PE
Funds
Solution
a. Yesterday's closing price = $ - 0
b. Shares purchased = ERROR:#DIV/0! rounded to the lower share
c. Annual dividend = ERROR:#DIV/0!
d. EPS = ERROR:#DIV/0!
2-26
Turn back to Figure 2.10 (listed below) and look at the Apple options. Suppose you buy an October expiration call option with exercise price $100. a. If the stock price in October is $102, will you exercise your call? What are the profit and rate of return on your position? b. What if you had bought the October call with exercise price $95? c. What if you had bought an October put with exercise price $100?
Call Put
Strike Last Volume Last Volume
August
August
August
August stock price
Solution
a. Gross profit $ - 0
Cost of options $ - 0
Net Profit $ - 0
Rate of return ERROR:#DIV/0!
b. Gross profit $ - 0
Cost of options $ - 0
Net Profit $ - 0
Rate of return ERROR:#DIV/0!
c. Gross profit $ - 0
Cost of options $ - 0
Net Profit $ - 0
Rate of return ERROR:#DIV/0!
2-32
Find the after-tax return to a corporation that buys a share of preferred stock at $40, sells it at year-end at $40, and receives a $4 year-end dividend. The firm is in the 30% tax bracket.
Preferred stock purchase price
Preferred stock sales price
Dividend
Tax bracket
Solution
Before tax income $ - 0
Taxable income $ - 0
Income taxes $ - 0
After tax income $ - 0
After tax rate of return ERROR:#DIV/0!