11. Supposed that a corporate bond with a Baa credit rating and five years to maturity has a yield to maturity of 8 percent. Suppose that the government of the city of Udwellum, which has Baa credit rating, issue a bond with the same time to maturity in a market that is just as liquid as the market for a corporate bond. Suppose that investors have a federal tax rate of 30 percent. Calculate the interest rate that Udwellum should pay on its bonds if they will yield the same after-tax rate of return to investors as comparable corporate bonds. Show your work. 13. You are given the following information on the bond market: Money available on January 1, 2004: $1,000 Interest rates on January 1, 2004, on bonds of different maturities: one year, 4 percent; two years, 5 percent; three years, 5.5 percent; four years, 6 percent Note: Consider these to be bonds that compound the interest at the rate given, that is, the three year bond pays $1,000 x 1.0553 at maturity. Expected future interest rates on one-year bonds. 14. How would you answer to question 13 change if there is a $10 transactions cost for every bond purchased? In other words, if an investor has $1,000 now, she can only spend $990 on a bond because $10 goes for transaction costs. Each time she buys a new bond, she buys a new bond, she incurs the $10 fee.