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MCS,PHD
Argosy University/ Phoniex University/
Nov-2005 - Oct-2011
Professor
Phoniex University
Oct-2001 - Nov-2016
11.  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 if your tax bracket is:
a.  Zero b. 10% c. 20% d. 30%
12.  Find the equivalent taxable yield of the municipal bond in the previous problem for tax brackets of zero, 10%, 20%, and 30%.
13.  Which security should sell at a greater price?
a.  A 10-year Treasury bond with a 9% coupon rate or a 10-year T-bond with a 10% coupon.
b.  A three-month maturity call option with an exercise price of $40 or a three-month call on the same stock with an exercise price of $35.
c.  A put option on a stock selling at $50 or a put option on another stock selling at $60. (All other relevant features of the stocks and options are assumed to be identical.)
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