# Tutorial answers 8s - 2206 AFE Tutorial answers 8 Week 11...

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2206 AFE Tutorial answers 8 Week 11 Answers Chapter 17 Problem 1 (p.680) Assuming all other relevant factors are equal, the corporate bond carrying an 8 percent coupon and selling at par offers a better return than a 5 1/2 percent municipal bond (with an equivalent tax yield of 7.639 percent). Problem 2 (p.680) 2(a). Present Value = Future Value x Present Value Factor PV = \$1,000 x .17411 = \$174.11 where .17411 is the present value factor for 6% interest (12% annually/2 interest payments per year) for 30 semi-annual periods (15 years x 2 interest payments per year) 2(b). PV = \$1,000 x .14205 = \$142.05 where .14205 is the present value factor for 5% interest (semi-annually) for 40 semi-annual periods. Problem 3 (p.681) 3(a). For the 15% tax bracket 3(b). For the 25% tax bracket 3(c). For the 35% tax bracket 07639 . 72 . 055 . 28 . 1 055 . t - 1 i ETY = = - = = t - 1 i ETY = .0988 .85 .084 .15 - 1 .084 ETY = = = .1120 .75 .084 .25 - 1 .084 ETY = = = .1292 .65 .084 .35 - 1 .084 ETY = = =

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Problem 4 (p.681)
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Tutorial answers 8s - 2206 AFE Tutorial answers 8 Week 11...

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