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A newly issued bond pays its coupons once annually. Its coupon rate is 4%, its maturity is 20 years, and its yield to maturity is
A newly issued bond pays its coupons once annually. Its coupon rate is 4%, its maturity is 20 years, and its yield to maturity is 11.5%. a. Find the holding-period return for a 1-year investment period if the bond is selling at a yield to maturity of 10% by the end of the year. (Do not round intermediate calculations. Round your answer to 2 decimal places.) points Holding period return eBook Print b. If you sell the bond after one year, 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 tax treatment. (Do not round intermediate calculations. Round your answers to 2 decimal places.) References Tax on interest income Tax 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-tax holding-period retum % d. Find the realized compound yield before taxes for a 2-year holding period, assuming that (1) you sell the bond after two years, (2) the bond yield is 10% at the end of the second year, and (3) the coupon can be reinvested for one year at a 3% interest rate. (Do not round intermediate calculations. Round your answer to 2 decimal places.)
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