- CFA Exams
- CFA Level I Exam
- Topic 6. Fixed Income
- Learning Module 2. Fixed-Income Cash Flows and Types
- Subject 3. Legal, Regulatory and Tax Considerations
CFA Practice Question
An investor is currently considering the choice between a corporate and a municipal bond. The yield on these two bonds is given below.
10-year corporate bond: 6.43
10-year municipal bond: 5.20
B. 4.44
C. 4.63
Securities: Yield
10-year corporate bond: 6.43
10-year municipal bond: 5.20
The investor's marginal tax rate is 28%. What is the after tax-yield on the corporate bond?
A. 3.74
B. 4.44
C. 4.63
Correct Answer: C
After-tax yield = Pre-tax yield (1 - marginal tax rate) = 6.43(1 - 0.28) = 4.63
User Contributed Comments 1
| User | Comment |
|---|---|
| DonAnd | u could imagine the question specifically asks for the after-tax yield on the CORPORATE bond and silly me calculated for the municipal bond....ahhhh!!!! careless!!!!! |