1. (21 points) As an individual investor you are considering a portfolio of three, non-callable, corporate bonds. The three bonds under consideration are those of Omega Inc., ABC Inc. and XYZ corp The bonds have the following characteristics: The bond of Omega Inc. was issued exactly 14 years ago with an original maturity of 30 years, a par value of $1,000 and a coupon interest rate of 108, interest being payable semi-annually It is currently selling for 825 The bond of ABC Inc. will mature 16 years from now and has a par value of $1,000. It has a coupon rate of 158, interest being paid semi-annually. It is currently selling for $1,200 The bond of XYZ Corp. has a $1000 par, 12% coupon rate, interest being payable semi-annually. It is currently selling at par and has a maturity of 16 years. The tax rate at which interest income will be taxed will remain 288; capital gains will be taxed at a reduced rate of 15%; capital losses will also result in tax savings at a rate of 15%. Both capital gains and capital losses, if any, will be recognized at the time of maturity. Using after-tax cash flows to find after tax yields, answer the following: a. (15 points) What is the nominal after-tax yield-to-maturity b. (3 points) What is the effective after-tax yield-to- C. (3 points) If you were to form a portfolio of the above of each of the above bonds? maturity of each of the above bonds? bonds by allocating 30% in Omega, 40% in ABC and the balance in XYZ, what is the effective after-tax yield-to- maturity of your bond portfolio