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Investors purchase these bonds, effectively lending money to the issuing company. In return, the company promises to pay periodic interest payments, typically semi-annually, and return the ...
Some municipal bonds are tax-exempt, meaning that investors can rake in their interest earnings without paying federal taxes. ... Corporate bonds. ... so say you purchase a bond for $1,000 and re ...
Corporate bonds. U.S. Treasury bills. ... an investor could purchase a zero-coupon bond with a face value of $1,000 for $600. ... Understand the tax implications.
Where r m = interest rate of municipal bond, r c = interest rate of comparable corporate bond and t = investor's tax bracket (also known as marginal tax rate): [35] = For example, assume an investor in the 38% tax bracket is offered a municipal bond that has a tax-exempt yield of 1.0%.
Corporate bonds are often divided into two categories: Investment-grade bonds. Investment-grade bonds come with at least a BBB- rating (or Baa3 from Moody's) from credit rating agencies. These ...
However, this is rare for corporate bonds. Some corporate bonds have an embedded call option that allows the issuer to redeem the debt before its maturity date. These are called callable bonds. [10] A less common feature is an embedded put option that allows investors to put the bond back to the issuer before its maturity date. These are called ...
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