What is the tax equivalent yield for a City of Mesa 2.5% muni bond for an investor in the 35% tax bracket?

Tax equivalent yield = 38.5%

Explanation:

Return on a municipal bond = 2.5%

Since municipal bonds are non taxable, for a similar taxable bond, tax equivalent yield is :

Tax equivalent yield = Yield on municipal bond / (1 - tax rate)

Tax equivalent yield = 2.5% / ( 1 - 0.35)

Tax equivalent yield = 0.025 / 0.65

Tax equivalent yield = 0.03846154

Tax equivalent yield = 38.5%

a. Financing for public corporations must flow through financial markets.

FALSE, it can flow through financial markets or financial intermediaries.

b. Financing for private corporations must flow through financial intermediaries.

FALSE, it can flow through financial markets or financial intermediaries.

c. Almost all foreign exchange trading occurs on the floors of the FOREX exchanges in New York and London.

FALSE, they are traded in many different markets around the world.  

d. Derivative markets are a major source of finance for many corporations.

FALSE, the major source of financing for corporations are stock markets.

e. The opportunity cost of capital is the capital outlay required to undertake a real investment opportunity.

FALSE, opportunity cost of capital refers to lost earnings resulting from choosing one investment over another alternative.

f. The cost of capital is the interest rate paid on borrowing from a bank or other financial institution.

FALSE, opportunity cost of capital refers to lost earnings resulting from choosing one investment over another alternative.