3.TAX-EQUIVALENT YIELD.A 10-year municipal bond has a coupon rate of 4.5% and just sold today for 104.56. It matures on December 1, 2023. What is its tax-equivalent yield? Assume a marginal tax rate of 40% and interest is paid June 1 and December 1. (Do not use the % sign with your answer).

4.COMPARE DURATION/MDURATION.Which of the following is true about duration and modified duration?

I.The Macaulay duration calculates the weighted averagetime before a bondholderwould receive the bond's cash flows.

II.Modified durationmeasures price sensitivity of a bondto changes in YTM by adjusting duration with a factor based on current yield.

III.The value of duration and modified duration are usually very close, but duration is almost always a larger number.

IV.Duration is important to banks when they try to assess the risk of bond portfolios on their balance sheet.

a.Only I and II are true.

b.All but IV are true.

c.Only II and III are true.

d.All are true.