A:

A. 8.0%

B. 22.2%

C. 9.3%

D. 12.5%






Correct answer: D

"A" divides 1-minus-tax-rate by the tax-exempt yield, instead of vice versa, and the sloppy mathematician will not notice the order-of-magnitude problem and will read "8" as "8%". "B" divides the tax-exempt yield by the tax rate, not 1-minus-tax-rate. "C" is just a guess.



RELATED FAQS

  1. How can I create a yield curve in Excel?

    Find out more about the yield curve, what the yield curve is and how to create the yield curve for U.S. Treasury bonds using ...
  2. What are the most popular and useful measures of credit spread?

    Learn about the different types of credit spread measures that measure risk, including the zero-volatility spread and the ...
  3. What risk factors should investors consider before purchasing a callable bond?

    Understand the difference between callable and non-callable bonds and consider all the various risk factors associated with ...
  4. Under what circumstances might an issuer redeem a callable bond?

    Understand why an interest rate drop usually compels bond issuers to redeem callable bonds and re-issue them at the new, ...
RELATED TERMS
  1. Bond

    A debt investment in which an investor loans money to an entity ...
  2. Treasury Yield

    The return on investment, expressed as a percentage, on the debt ...
  3. Series I Bond

    A non-marketable, interest-bearing U.S. government savings bond ...
  4. Safe Haven

    An investment that is expected to retain its value or even increase ...
  5. Bond Resolution

    1. A document used with government bonds, especially general ...
  6. Fully Taxable Equivalent Yield

    The yield on a municipal bond, when the effect of reduced taxes ...

You May Also Like

Related Articles
  1. Mutual Funds & ETFs

    How To Short The U.S. Bond Market

  2. Mutual Funds & ETFs

    The EMAG Emerging Mkts Bond ETF: Worth ...

  3. Investing

    Feeling Risk-Averse? Consider These ...

  4. Mutual Funds & ETFs

    Is the DSUM Yuan Fixed Income ETF a ...

  5. Mutual Funds & ETFs

    Pros & Cons Of Bond Funds Vs. Bond ETFs

Trading Center