The Federal Reserve is offering Treasury bills with a par value of $30 billion for sale. They have received $11 billion of noncompetitive bids. The competitive bids for a $10,000 par value bond are:

91.    The Federal Reserve is offering Treasury bills with a par value of $30 billion for sale. They have received $11 billion of noncompetitive bids. The competitive bids for a $10,000 par value bond are:

   

How much money will the Federal Reserve raise from this offering?

 

A.     $29.55 billion

B.     $29.40 billion

C.     $29.10 billion

D.     $29.33 billion

E.     $29.25 billion

 Answer

Amount available to competitive bidders = $30b - $11b = $19b
Lowest acceptable bid price is $9,750, which is Bidder C.
Amount raised = $30b × ($9,750/$10,000) = $29.25b

92.    The Federal Reserve is offering Treasury bills with a par value of $10 billion for sale. They have received $3 billion of noncompetitive bids. The competitive bids for a $10,000 par value bond are: (Qty in billions)

  

How much money will the Federal Reserve raise from this offering?

 

A.     $9.92 billion

B.     $9.88 billion

C.     $9.85 billion

D.     $9.84 billion

E.     $9.80 billion

Answer

Amount available to competitive bidders = $10b - $3b = $7b
Lowest acceptable bid price is $9,850, which is Bidder B.
Amount raised = $10b × ($9,850/$10,000) = $9.85b

 

93.    A municipal bond is yielding 4.8 percent. Jeremy has a marginal tax rate of 24 percent. What is his equivalent taxable yield?

 

A.     2.18 percent

B.     4.58 percent

C.     6.15 percent

D.     6.32 percent

E.     7.18 percent

 Answer

Equivalent taxable yield = .048/(1 - .24) = 6.32 percent

94.    You have a marginal tax rate of 32 percent and an average tax rate of 28 percent. Municipal bonds in your area are yielding 4.25 percent. What is your equivalent taxable yield?

 

A.     5.16 percent

B.     5.93 percent

C.     5.13 percent

D.     6.25 percent

E.     6.47 percent

 

95.    Municipal bonds are yielding 4.8 percent currently. Alicia has a marginal tax rate of 35 percent and Yvonne has a marginal tax rate of 22 percent. Alicia's equivalent taxable yield is _____ percent and Yvonne's is _____ percent.

 

A.     7.50; 5.86

B.     7.39; 6.15

C.     6.53; 5.86

D.     6.53; 6.15

E.     8.29; 5.07

 

96.    Municipal bonds are yielding 4.4 percent if they are insured and 4.7 percent if they are uninsured. Your marginal tax rate is 28 percent. Your equivalent taxable yield on the insured bonds is _____ percent and on the uninsured bonds is _____ percent.

 

A.     5.89; 6.27

B.     6.11; 6.53

C.     6.31; 6.81

D.     6.67; 7.10

E.     6.76; 7.10

 

97.    You own a corporate bond which is yielding 8.2 percent. What is your after-tax yield if your marginal tax rate is 28 percent?

 

A.     5.90 percent

B.     7.52 percent

C.     8.20 percent

D.     10.58 percent

E.     11.55 percent

 

98.    Laura has an average tax rate of 22 percent and a marginal tax rate of 28 percent. What is her after-tax yield on a corporate bond which has a 6.7 percent yield?

 

A.     4.82 percent

B.     5.09 percent

C.     5.47 percent

D.     6.00 percent

E.     11.34 percent

 

99.    Jeff owns a taxable bond portfolio which is yielding 8.76 percent. His after-tax yield is 6.57 percent. What is his marginal tax rate?

 

A.     25 percent

B.     28 percent

C.     31 percent

D.     32 percent

E.     34 percent

 

100.    A corporate bond is yielding 6.8 percent and a municipal bond is yielding 4.75 percent. What is the critical marginal tax rate?

 

A.     28 percent

B.     30 percent

C.     33 percent

D.     35 percent

E.     38 percent

 

101.    Sonya has a marginal tax rate of 36 percent. A corporate bond is yielding 7.4 percent and a municipal bond is yielding 3.6 percent. Sonya should invest in the _____ bond because the critical marginal tax rate is _____ percent.

 

A.     corporate; 17

B.     corporate; 34

C.     corporate; 51

D.     municipal; 43

E.     municipal; 51

 

102.    Lester is considering a municipal bond yielding 5.5 percent and a corporate bond yielding 8.2 percent. His marginal tax rate is 28 percent. He should invest in the _____ bond because the critical marginal tax rate is _____ percent.

 

A.     corporate; 26

B.     corporate; 29

C.     corporate; 33

D.     municipal; 35

E.     municipal; 37

 

103.    A $5,000 face value municipal bond matures in 14 years and is priced at $4,862. The coupon rate is 4.5 percent with interest paid semiannually. What is the yield to maturity on the bond?

 

A.     4.77 percent

B.     5.14 percent

C.     5.40 percent

D.     5.61 percent

E.     5.97 percent

 

104.    A $5,000 face value municipal bond matures in 6 years and has a market value of $5,110. The coupon rate is 3.5 percent with interest paid semiannually. What is the yield to maturity?

 

A.     2.92 percent

B.     3.10 percent

C.     3.73 percent

D.     5.13 percent

E.     6.38 percent

 

                                        

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