11 Suppose that short-term municipal bonds currently offer yields of 4%, while comparable taxable bonds pay 5%

11 Suppose that short-term municipal bonds currently offer yields of 4%, while comparable taxable bonds pay 5%. Which gives you the higher after-tax yield if your tax bracket is:

a.   Zero b. 10% c. 20% d. 30%

12.   Find the equivalent taxable yield of the municipal bond in the previous problem for tax brackets of zero, 10%, 20%, and 30%.

13.   Which security should sell at a greater price?

a.   A 10-year Treasury bond with a 9% coupon rate or a 10-year T-bond with a 10% coupon.

b.   A three-month maturity call option with an exercise price of $40 or a three-month call on the same stock with an exercise price of $35.

c.   A put option on a stock selling at $50 or a put option on another stock selling at $60. (All other relevant features of the stocks and options are assumed to be identical.)