Martin is trying to decide which one of the following bonds he should purchase. All the bonds have the same maturity date and all have approximately the same level of risk. Martin is in the 32 percent federal income tax bracket and the 6 percent state income tax bracket. The municipal bonds are from his home state. $$\begin{array} { c l c }
\text { Bond } & \text { Type of bond } & \text { Bond Characteristics } \
\hline \text { A } & \text { Corporate } & 7.2 \% \text {, callable } \
\text { B } & \text { Corporate } & 7 \% \text { non-callable } \
\text { C } & \text { Municpal } & 4.75 \% \text { non-callable } \
\text { D } & \text { Municipal } & 4.77 \% \text { callable }
\end{array}$$ Which bond should Martin purchase if he wishes to hold it for the long term?
A) bond A because it has the highest yield and cannot be called
B) bond B because it has the highest yield and cannot be called
C) bond C because it has the highest after-tax yield
D) bond D because it has the highest after tax yield and cannot be called

Question

Martin is trying to decide which one of the following bonds he should purchase. All the bonds have the same maturity date and all have approximately the same level of risk. Martin is in the 32 percent federal income tax bracket and the 6 percent state income tax bracket. The municipal bonds are from his home state. $$\begin{array} { c l c } 
\text { Bond } & \text { Type of bond } & \text { Bond Characteristics } \
\hline \text { A } & \text { Corporate } & 7.2 \% \text {, callable } \
\text { B } & \text { Corporate } & 7 \% \text { non-callable } \
\text { C } & \text { Municpal } & 4.75 \% \text { non-callable } \
\text { D } & \text { Municipal } & 4.77 \% \text { callable }
\end{array}$$ Which bond should Martin purchase if he wishes to hold it for the long term?
A) bond A because it has the highest yield and cannot be called
B) bond B because it has the highest yield and cannot be called
C) bond C because it has the highest after-tax yield
D) bond D because it has the highest after tax yield and cannot be called

Quizplus · Accepted Answer

The Answer of Martin is trying to decide which one of the following bonds he should purchase. All the bonds have the same maturity date and all have approximately the same level of risk. Martin is in the 32 percent federal income tax bracket and the 6 percent state income tax bracket. The municipal bonds are from his home state. $$\begin{array} { c l c } 
\text { Bond } & \text { Type of bond } & \text { Bond Characteristics } \
\hline \text { A } & \text { Corporate } & 7.2 \% \text {, callable } \
\text { B } & \text { Corporate } & 7 \% \text { non-callable } \
\text { C } & \text { Municpal } & 4.75 \% \text { non-callable } \
\text { D } & \text { Municipal } & 4.77 \% \text { callable }
\end{array}$$ Which bond should Martin purchase if he wishes to hold it for the long term?
A) bond A because it has the highest yield and cannot be called
B) bond B because it has the highest yield and cannot be called
C) bond C because it has the highest after-tax yield
D) bond D because it has the highest after tax yield and cannot be called

Martin Is Trying to Decide Which One of the Following