PART A (8 marks)\ Recently, April purchased a bond for

$23,150

that pays a

8%

coupon, payable quarterly. The\ bond matures in 6 years at a par value of

$25,000

. She can reinvest the quarterly coupon at\

3.5%

compounded annually. Her salary is

$73,000

per year. Her marginal tax rate is

40%

, which\ is also the applicable tax rate on interest income. The tax rate on dividend income is

22%

and\ the tax rate on capital gain income is

20%

. HINT: The first 2 questions below are before-tax, the\ last one is after-tax.\ How much coupon income will April receive each quarter? Over 6 years? (2 marks)

PART A (8 marks) Recently, April purchased a bond for $23,150 that pays a 8% coupon, payable quarterly. The bond matures in 6 years at a par value of $25,000. She can reinvest the quarterly coupon at 3.5% compounded annually. Her salary is $73,000 per year. Her marginal tax rate is 40%, which is also the applicable tax rate on interest income. The tax rate on dividend income is 22% and the tax rate on capital gain income is 20%. HINT: The first 2 questions below are before-tax, the last one is after-tax