Francisco is planning to invest up to $27,000 in corporate and municipal bonds. The least he is allowed to invest in corporate bonds is $5000, and he does not want to invest more than $19,000 in corporate bonds. He also does not want to invest more than $19,000 in municipal bonds. The interest is 5% on corporate bonds and 3% on municipal bonds. This is simple interest for one year. How much should he invest in each type of bond in order to maximize his income? What is the maximum income? Francisco should invest in corporate bonds and in municipal bonds in order to maximize his income.
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- Candy has $70,000 to invest and wants an annual return of $2800, which requires an overall rate of return of 4%. She can invest in a safe, government-insured certificate of deposit, but it pays only 2%. To obtain 4%, she agrees to invest some of her money in noninsured corporate bonds paying 7%. How much should be placed in each investment to achieve her goal?Whitney recently retired, and has $450,000 in savings. She wants to invest as much as possible in a safe CD account paying 1.1% interest, and as little as possible in a riskier bond paying 5.6% interest. She needs to earn $16,200 a year in interest to cover expenses above SSI. How much should she invest in each account?$ in the CD at 1.1%$ in the bond at 5.6%Your grandfather is retired and living on his Social Security benefits and the interest he gets from savings. However, the interest income he receives has dwindled to only 2 percent a year on his $200,000 in savings as interest rates in the economy have dropped. You have been thinking about recommending that he purchase some corporate bonds with at least part of his savings as a way of increasing his interest income. Specifically, you have identified three corporate bond issues for your grandfather to consider. The first is an issue the Young Corporation that pays annual interest based on a 7.8 percent coupon rate and has 10 years before it matures. The second bond was issued by Thomas Resorts and it pays 7.5 percent annual interest and has 17 years until it matures. The final bond issue was sold by Entertainment, Inc., pays an annual coupon interest payment based on a rate of 7.975 percent, and has only 4 years until it matures. All three bond issues have a $1,000 par…
- Ten years ago Jim took a mortgage loan of $200,000 to be repaid in 20 equal annual installments of $30,197.34. The bank has told him that they would accept $145,000 today as payment in full for the remainder of the loan. What is the balance on this loan? If we assume that Jim has the money, what interest rate must he earn on alternative investments in order not to accept the bank offer?Stacey faces a 15% tax rate on interest income. She can buy a $100 face value corporate bond yielding 12.5% ($12.5) annually for $100 or a municipal bond yielding $12.5 annually. Both bond issues have similar maturities and risk. How much is she willing to pay for the municipal bond?Your grandfather is retired and living on his Social Security benefits and the interest he gets from savings. However, the interest income he receives has dwindled to only 2 percent a year on his $200,000 in savings as interest rates in the economy have dropped. You have been thinking about recommending that he purchase some corporate bonds with at least part of his savings as a way of increasing his interest income. Specifically, you have identified three corporate bond issues for your grandfather to consider. The first is an issue the Young Corporation that pays annual interest based on a 7.8 percent coupon rate and has 10 years before it matures. The second bond was issued by Thomas Resorts and it pays 7.5 percent annual interest and has 17 years until it matures. The final bond issue was sold by Entertainment, Inc., pays an annual coupon interest payment based on a rate of 7.975 percent, and has only 4 years until it matures. All three bond issues have a $1,000 par…
- You decide to invest $27,000 in a municipal bond that earns 6.15% and is federally tax free. Your tax rate is 28%, how much have you effectively earned after ten years, assuming annual compounding? (Hint: must use two formulas to solve this question) In other words, because you are not paying taxes how much have you effectively earned?"Mr. Fuentes has $15,000 to invest. He is undecided about putting the money into tax-exempt municipal bonds paying 3.5 percent annual interest or corporate bonds paying 4.75 percent annual interest. The two investments have the same risk. Which investment should Mr. Fuentes make if his marginal tax rate is 32 percent? Would your conclusion change if Mr. Fuentes’s marginal tax rate is only 12 percent?Joan bought a bond several years ago for $23,000, Today, the value has declined to $18,000. If Joan gifts the bond to her brother today, all the following statements are true except? A. If he sells the bond for $18,000 or less, his basis will be $18,000 and his holding period will be short-term. B. If he holds the bond for 6 months, the price recovers and he sells it for more than $23,000, his basis will be $23,000 and his holding period will be short-term. C. If he sells the bond for more than $18,000 but less than $23,000 there will be no gain whatsoever and the holding period won't matter. D. If he sells the bond in 10 months for $23,000 exactly, there will be no gain but the holding period will be long-term.
- Anita Anderson owns tax-free bonds valued at $12,000, which is 23% of her total investments. What is the value of her total investments? Round to the nearest dollar.1 a)Katie paid $9,400 for a corporate bond with a par value of $10,000 and a coupon rate of 6.5%. She holds the bond for 2 full years and then sells the bond for $9,700. Since Katie is in the 25% marginal tax bracket, how much tax will she have paid during the time she held the bond? (Ignore Long-term capital gains) b)Tim has an opportunity to buy a $1,000 par value bond with a coupon rate of 7% and a maturity of 5 years. If Tim requires a 9% return on his investments, what is the most he would pay for this bond? C)Mark has a portfolio of bonds worth $30,000. They are all 6% bonds with a maturity in 15 years. New bonds are currently selling at a rate of 8%. How much money can Mark expect to receive on the sale of his bonds? d)You previously purchased a $1,000 bond, with a coupon rate of 5%. If comparable bonds are currently selling at a coupon rate of 4%, which is the current market value of your bond? e)Last year you purchased a 15 year bond at 98 with a coupon rate of 5%. The current…Gerry is an entry-level engineer at Boeing Aerospace in California. He took a financial risk and bought a bond from a different corporation that had defaulted on its interest payments. The bond bought at 4240, is an 8% $10,000 bond with interest payable quarterly. The bond paid no interest for the first 3 years after Gerry bought it. If interest was paid for the next 7 years, and then Gerry was able to resell the bond for $11,000, what rate of return did he make on the investment? Assume the bond is scheduled to mature 18 years after he bought it. Plz do fast asap, urgent..