Coterminous

  

Er..."with terminus."

Coterminous debt is municipal bond debt that was incurred in connection with some asset that benefits more than one municipality's citizens. In coterminous debt, the obligation for the debt belongs to more than one municipality. Like the rich city sticks up for the poor city when the creditors say, "You need more and better collateral."

Example:

A public park has a border between two cities and is used by citizens of both cities. If the cities issued debt to pay for upkeep in the park, the debt would be coterminous, because it would be owed by the citizens of both cities.

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Finance: Who buys muni bonds?1 Views

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Finance allah shmoop who buys communi bonds who buys them

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rich people or rather people earning enough active income such

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that their marginal tax rates are very high Munich bonds

00:15

are tax free so in practice they tend to offer

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lower net yields than taxable corporate bonds Okay so what's

00:22

the math here Well if your ah high earner i'ii

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europe bo tox correction surgeon or an ambulance chasing attorney

00:29

from new york Or an all star nfl linebacker with

00:32

no felony drug or spousal battery convictions Yeah a few

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of those actually do exist Well then it's likely that

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you pay the highest marginal tax rates They seem to

00:41

change every election cycle so will generalize here so we

00:45

don't have to redo this video every two to four

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years At the highest rates you'll pay about thirty five

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percent federal tax and twelve ish percent state tax and

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usually an override for some other political initiative like obama

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care or the wall fund or the no child left

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behind fund at the zune fund Beyond those total them

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up And let's say you pay fifty percent marginal tax

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on your last in a few million bucks in earnings

01:08

and let's also say for illustrative purposes here assumed that

01:13

the bonds we are comparing our of equivalent risk and

01:16

duration compared with these immunities right Let's say so They're

01:19

both a rated and they come due in on a

01:21

half a dozen years Well the corporate bonds than yield

01:25

us a seven point two percent and the parallel nooni

01:28

bond yields four percent So then which bond has the

01:31

higher value to its high tax paying owner Well if

01:35

you're paying fifty percent tax on the seven point two

01:38

percent corporate bond than you the nun convicted linebacker pay

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net after tax fifty percent of seven point two percent

01:45

interest or three point six percent The munich carries no

01:48

tax so it's gross is net meaning the four percent

01:52

yield of them unibond produces point four percent a year

01:55

Better yield after taxes then does the corporate bond So

01:59

what if you were a sir school teacher not rich

02:01

paying this a twenty percent marginal tax instead of fifty

02:05

Well then you'd go for the corporate bond It yields

02:08

gross seven point two percent But after your twenty percent

02:11

tax the yield after tax on that corporate to you

02:14

mrs whitehead homeroom number fourteen teacher of health and sex

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ed to simply horny teams Yes your yield then is

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point eight times seven point two or five point seven

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six percent way higher than the muniz yield of four

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percent The differences here in yield from a corporate versus

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immune e maybe don't seem like a lot but over

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time they really add up So once you make your

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first one hundred million or so don't forget teo you

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Finance: What is a Muni Bond?
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