Each answer must be a minimum 200 words in length and in APA format:
1. What are municipal bonds? We are comparing the equivalent tax-free rate of two investments: 1) A taxable corporate bond that is at a rate of 10%, with a marginal tax of 30%, and 2) A tax-free municipal bond that is at a rate of 8%. Which of the two investments offers a better return considering the tax impact? (Show all work/calculations/formulas.)
2. We are currently bidding on Treasury bills and have determined that we must have a 5% return for a $1,000 T-Bill that will mature in one year. How much would we be willing to bid on the Treasury bill? If we are bidding on a 13 weeks Treasury bill with a 1% return and a 26 weeks Treasury bill with a 2% return for a $1,000 T-bill, how much would we be willing to bid on the Treasury bills? (Show all work/calculations/formulas.)
3. Based upon the Gordon Growth Model, calculate the anticipated market price of a stock that is paying dividends at a constant growth rate of 6.25%, with a recent dividend of $1.00, and a required return rate of 15%. (Show all work/calculations/formulas.)
You would like to consider purchasing a stock that is selling for $90 and pays $2.33 a year in dividends. It is predicted that the stock is going to sell for $114 one year from now, and you would like to earn 15% on the investment. Should you purchase the stock today- based upon the One-Period Valuation Model? And, what should the market price be today? (Show all work/calculations/formulas)
4.What is the difference between primary markets and secondary markets?