T

10. which of the following is FALSE about municipal bonds? (CHOOSE ONE.) Municipal Bonds may offer a l advantage. wer yield to maturity than a similar corporate bond because it has a tax Municipal bonds are rated for default risk like corporate bonds. All investors should always pref ays prefer a municipal bond over a corporate bond because of the tax advantage Municipal bonds are often preferred by wealthy investors who pay a high tax rate. Which of the following is TRUE about the callable bonds? ( (Circle all that apply. You may choose more than dine A callable bond with a coupon of 2% is likely to be called when yields are 2%. Callable bonds are called when interest rates go up. Callable bonds allow the issuer to refinance at lower rates. If you think interest rates are going down, you should buy a callable bond 12. Suppose you are choosing between the following two bonds Coupon Rate Type Price Rating Callable $1055 1.800% 1.500% | AA Payment Frequency Muni No 2.600% 2.100% |AA Semi-annual Corporate $1100 Semi-annual Which of the following is true? At a tax rate of 30%, you prefer the municipal bond At a tax rate of 30%, you prefer the corporate bond You always prefer a municipal bond because of the tax advantage Not enough information to determine. Part 2, Problems, 64 points, point values as indicated. 13. 10 points. You are looking at a 14-year zero-coupon bond that has a yield to maturity of 5% . What is the value of the bond? 14. 6 points. A mortgage charges an interest rate of 4.8% per year compounded monthly. What is the EAR? 15. You got a $40 parking ticket a month ago and you have been charged a late fee of $13 because you are payment 21 days late. a. 7 points. What is the APR? b. 6 points. What is the EAR