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Question
Suppose a bank has found bank-qualified municipal bonds which have a nominal gross rate of return of 8 percent and that it can borrow funds needed for this purchase at a rate of 6.25 percent. The bank is in the 35 percent tax bracket. What is the net after-tax return on this bond?
A. 5.20 percent
B. 3.5 percent
C. 1.75 percent
D. 0 percent
E. None of the options is correct
Answer
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Related questions
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Which of the following adjustments are made to gross loans and leases to obtain net loans and leases?
A. Loan and lease loss allowance is added to gross loans.
B. Unearned income is subtracted from gross interest received.
C. Investment income is added to gross interest received.
D. Loan and lease loss allowance and unearned income is subtracted from gross loans.
E. Loan and lease loss allowance is subtracted from gross loans and investment income is added to gross interest received.
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B. three
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Which of the following would not be a telephone service that customers can get from a bank call center?
A. The current balance in their account
B. A fax copy of a loan application to the bank
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What is the yield to maturity on this T-Bill?
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C. It should fall by 4 percent.
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Which of the following would be an example of a repriceable asset?
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B. Cash in the vault
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A. deposits and non-deposit borrowings are not affected by changes in interest rates.
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The _______________ is determined by the demand and supply for loanable funds in the market.
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According to the textbook, the lackadaisical profit performance surrounding a merger may be explained by the:
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B. lenders cutting off credit lines due to the merger.
C. accounting irregularities when reporting earnings of the combined entity.
D. managerial hubris and sizeable merger premium that acquirers have to pay to shareholders of the acquired firms.
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According to the textbook, bank mergers are often motivated by:
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E. All of the options are correct.
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