A 475 Percent Coupon Bond Issued by the State of Washington

question 41

Multiple Choice

A 4.75 percent coupon bond issued by the State of Washington sells for $1,000. What coupon rate on a corporate bond selling at $1,000 par value would produce the same after-tax return to the investor as the municipal bond if the investor is in the 28 percent marginal tax bracket?

• A) 1.1 percent
• B) 5.8 percent
• C) 6.6 percent
• D) 7.3 percent
• E) 9.7 percent

---

Definitions:

Decision Processes

The series of steps or stages involved in selecting among alternatives based on criteria and eventual outcomes.

Reporting Principles

The foundational guidelines that govern the preparation and presentation of financial reports, ensuring accuracy, consistency, and transparency.

Historical Cost Principle

An accounting principle that requires financial statements to be based on the original cost of an asset, rather than its current market value.

Consistency Principle

An accounting principle that requires entities to apply the same accounting methods and policies from period to period unless a change is justified and disclosed.