An 85 Percent Coupon Bond Issued by the State of Ohio

question 17

Multiple Choice

An 8.5 percent coupon bond issued by the State of Ohio 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 25 percent marginal tax bracket?

• A) 2.13 percent
• B) 12.25 percent
• C) 11.33 percent
• D) 13.53 percent
• E) 34.71 percent

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Definitions:

Consolidated Books

Financial records that combine the assets, liabilities, and operating accounts of parent and subsidiary companies into one set of statements.

Translation Loss

A decrease in the value of foreign currencies held by a company because of changes in exchange rates, affecting the financial statements when consolidating.

Expropriates

The action of a government taking privately owned property, usually without fair compensation.

Multinational Firm

A company that operates in multiple countries, utilizing a global strategy to manage its operations and market its products or services.