Question
Suppose on April 24, 2020, you purchased this bond in the market and held this bond for exactly one year (till April 24, 2021). The
Suppose on April 24, 2020, you purchased this bond in the market and held this bond for exactly one year (till April 24, 2021). The yield on this bond on April 24, 2021 was 2.25% and you decided to sell the bond. Assume you face 32% marginal tax rate and that 50% of capital gains are taxable. Assume also that coupon interest payments can be reinvested at the annual yield of 3%.
1.Determine your gross income and gross return from your investment. 2 Determine your net income and net return from your investment 3 Decompose your net income into its components and comment on your results as a portfolio manager.
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