Ernie Griffin just purchased a five-year zero coupon corporate bond for $680.60 and plans to hold it

Question:

Ernie Griffin just purchased a five-year zero corporate bond for $680.60 and plans to hold it until maturity. Assume Ernie has a marginal tax rate of 25%.
a. Calculate Ernie’s after-tax cash flows from the bond for the first two years. Assume annual compounding.
b. Describe in words the difference in cash flows between owning Ernie’s bond and a five-year U.S. savings bond for the same amount.

Coupon
A coupon or coupon payment is the annual interest rate paid on a bond, expressed as a percentage of the face value and paid from issue date until maturity. Coupons are usually referred to in terms of the coupon rate (the sum of coupons paid in a...