Question 1: ABC Ltd.'s bonds sell for 90% of their face value (assume face value = $100). These bonds come with a coupon rate of 5%. The bonds will mature in 20 years and will pay the coupon semi-annually. Any interest income attracts a 15% tax for the investor. Determine the after-tax YTM for the investor.

Answer: Either 4.98% or 5.06%. Both are correct. YTM is approximately 5% (rounded off)

Question 2: Bonds from XYZ Inc. offer an after-tax YTM of 5%. They have 15 years left to mature and offer a coupon rate of 6% paid annually. Determine the price of these bonds. The interest income from these bonds is subject to a tax rate of 20%

Answer: Either $976.11