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A bondholder is subject to a tax of K% (when the bond matures) on the amount of discount at which they buy the bond at.
A bondholder is subject to a tax of K% (when the bond matures) on the amount of discount at which they buy the bond at. No tax is paid on coupons. A 10 year, $1, 000 bond of this type has 4% annually paid coupons. If the bond is bought at $915 and the buyer realizes an effective annual yield of 5% after taxes then find K.
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