An investor purchases a 30-year U.S. government bond for $840. The bond’s coupon rate is 10 percent and, it still had twelve years remaining until maturity. If the investor holds the bond until it matures and collects the $1000 par value from the Treasury and his marginal tax rate is 25 percent (we assume that the bond is taxable), what will be his after-tax (effective) yield to maturity? Make sure to show your work.
An investor purchases a 30-year U.S. government bond for $840. The bond’s coupon rate is 10 percent and, it still had twelve years remaining until maturity. If the investor holds the bond until it matures and collects the $1000 par value from the Treasury and his marginal tax rate is 25 percent (we assume that the bond is taxable), what will be his after-tax (effective) yield to maturity? Make sure to show your work.
Microeconomics A Contemporary Intro
10th Edition
ISBN:9781285635101
Author:MCEACHERN
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Chapter13: Capital, Interest, Entrepreneurship, And Corporate Finance
Section: Chapter Questions
Problem 13PAE
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6. An investor purchases a 30-year U.S. government bond for $840. The bond’s coupon
rate is 10 percent and, it still had twelve years remaining until maturity. If the investor
holds the bond until it matures and collects the $1000 par value from the Treasury
and his marginal tax rate is 25 percent (we assume that the bond is taxable), what will
be his after-tax (effective) yield to maturity? Make sure to show your work.
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