Tax status is interest income taxable 1 municipals vs

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Unformatted text preview: (is interest income taxable?) 1. Municipals vs. Treasuries vs Corporate debt Municipals issues issues 2. Before Tax Equivalent Yields Before a. Ybt = Yat / ( 1 – Tx) a. Dr. David P. Echevarria Dr. All Rights Reserved 3 TERM STRUCTURE THEORIES A. Pure Expectations Theory 1. Investor / borrower expectations and preferred maturities 2. Computing the forward rate (see page 54) Computing forward B. Liquidity Premium Theory 1. S-T securities typically more marketable that L-T S-T that 2. Increase in marketability, ceteris paribus, should result in Increase lower YTM lower C. Segmented Markets Theory 1. Investor preferences for certain maturities investment Investor horizon horizon 2. Nature of asse...
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