A newly issued bond pays annual coupons. Coupon rate 5%, maturity 20-year and YTM 8%. • Suppose rate drop to 7% after one year. Calculate after-tax return if you sell the bond after one year. Capital gain tax 30% and ordinary income tax 40%. The bond is subject to the OID tax treatment A. 12.00% B.13.00%

A newly issued bond pays annual coupons. Coupon rate 5%, maturity 20-year and YTM 8%. • Suppose rate drop to 7% after one year. Calculate after-tax return if you sell the bond after one year. Capital gain tax 30% and ordinary income tax 40%. The bond is subject to the OID tax treatment A. 12.00% B.13.00%

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter5: The Time Value Of Money

Section: Chapter Questions

Problem 17P

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