Bond 1 is a 10-year , 10% bond with a price of P1= 92.21

Bond 2 is a 10-year, 7% bond with a price of P2 = 75.84

8. (Real zeros) Actual zero-coupon bonds are taxed as if implied coupon payments were made each year (or really every 6 months), so tax payments are made each year, even though no coupon payments are received. The implied coupon rate for a bond with n years to maturity is (100 - Po) , where Po is the purchase price. If the bond is held to maturity, there is no realized capital gain, since all gains are accounted for in the implied coupon payments. Compute the theoretical price of a real 10-year zero-coupon bond. This price is to be consistent on an after-tax basis with the prices of bonds 1 and 2 of Exercise 7