Consider the decision to purchase either a five year corporate bond or a five year municipal bond The corporate bond is a 12 annual coupon bond with a par value of $1,000 It is currently yielding 11 5 The municipal bond has an 8 5 annual coupon and a par value of $1,000 It is currently yielding 7 W...

Municipal Bond Purchase Price 106150 Aftertax Coupon ...

Consider the decision to purchase either a five-year corporate bond or a five-year municipal bond. The corporate

Question:

Consider the decision to purchase either a five-year corporate bond or a five-year municipal bond. The corporate bond is a 12% annual bond with a of $1,000. It is currently yielding 11.5%. The municipal bond has an 8.5% annual and a of $1,000. It is currently yielding 7%. Which of the two bonds would be more beneficial to you? Assume that your marginal tax rate is 35%.

Coupon
A coupon or coupon payment is the annual interest rate paid on a bond, expressed as a percentage of the face value and paid from issue date until maturity. Coupons are usually referred to in terms of the coupon rate (the sum of coupons paid in a... Par Value
Par value is the face value of a bond. Par value is important for a bond or fixed-income instrument because it determines its maturity value as well as the dollar value of coupon payments. The market price of a bond may be above or below par,...