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You bought a 1 0 - year, 5 % coupon bond for $ 1 , 0 0 0 and sold it 1 year later for

You bought a

10 -

year,

5 %

coupon bond for $

1, 000

and sold it

1

year later for

1, 100 .

What is the rate of return on your investment if the bond pays interest

annually? If your marginal tax rate is

30 %,

and

50 %

of capital gains are taxable, what

is the after

-

tax rate of return on your bond investment?

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