A newly issued bond pays its coupons once a year. Its coupon rate is $4\mathrm{.}8\%,$ its maturity is $20$ years, and its yield to maturity is $7\mathrm{.}8\%.$

Required:

a$.$ Find the holding$-$period return for a one$-$year investment period if the bond is selling at a yield to maturity of $6\mathrm{.}8\%$ by the end of the year. $($Do not round intermediate calculations. Round your answer to $2$ decimal places.$)$

Holding$-$period return

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b$.$ If you sell the bond after one year when its yield is $6\mathrm{.}8\%,$ what taxes will you owe if the tax rate on interest income is $40\%$ and the tax rate on capital gains income is $30\%?$ The bond is subject to original$-$issue$-$discount $($OID$)$ tax treatment. $($Do not round intermediate calculations. Round your answers to $2$ decimal places.$)$

Tax on interest income

Tex on capital gain

Total taxes

c$.$ What is the after$-$tax holding$-$period return on the bond? $($Do not round intermediate calculations. Round your answer to $2$ decimal places.$)$

After$-$taxholaing$-$period return

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d$.$ Find the realized compound yield before taxes for a two$-$year holding period, assuming that $($i$)$ you sell the bond after two years, $($ii$)$ the bond yield is $6\mathrm{.}8\%$ at the end of the second year, and $($iii$)$ the coupon can be reinvested for one year at a $2\mathrm{.}8\%$ interest rate. $($Do not round intermediate calculations. Round your answer to $2$ decimal places.$)$

Realized compound yield before taxes

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