Chapter 7 - Chapter 7 Conceptual Problems 1. My after tax...

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Chapter 7 Conceptual Problems 1. My after tax rate of return would be 5.7% on the corporate bond. The after tax rate on the municipal bond would be 3.2%. I would dice which bond to hold by the amount that the bond would pay back to me at the end of the period. In this case it would be the corporate bond because the tax exempt bond yield is higher than the municipal bond. 3. This would change the forecast of future economic activity because if the risk premium of bonds were to increase, this would likely make more risk taking investors to buy them. If they thought that it might pay off even more in the end, they would be more willing to take that risk. This would in turn lead to more bonds being bought and the value of them increasing, which would have a positive effect on the economy. 5. The yield curve for the next 3 years would be 5 percent. This is the addition of the three year’s interest rates divided by the number of years. 7.
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This note was uploaded on 10/31/2010 for the course ECON 2310 taught by Professor Williams during the Spring '10 term at Western New Mexico.

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Chapter 7 - Chapter 7 Conceptual Problems 1. My after tax...

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