CFA Practice Question

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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.

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!!!!!
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