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22 Consider a bond paying an annual coupon rate of 6%, coupons paid quarterly, and with par value 1,000 USD. Assume that the quarterly interest
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Consider a bond paying an annual coupon rate of 6%, coupons paid quarterly, and with par value 1,000 USD. Assume that the quarterly interest rate is constant at 3%. The bond has two years to maturity. a. What is the bond price today? b. What is the HPR on the bond two periods from now, after the second coupon has paid out, if by the second period the bond is selling at a yield to maturity of 1%? C. What is the after-tax HPR on the bond, if the tax rate on interest income is 35% and the tax rate on capital gains income is 30%? Consider a bond paying an annual coupon rate of 6%, coupons paid quarterly, and with par value 1,000 USD. Assume that the quarterly interest rate is constant at 3%. The bond has two years to maturity. a. What is the bond price today? b. What is the HPR on the bond two periods from now, after the second coupon has paid out, if by the second period the bond is selling at a yield to maturity of 1%? C. What is the after-tax HPR on the bond, if the tax rate on interest income is 35% and the tax rate on capital gains income is 30%Step by Step Solution
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