Suppose that the yield to maturity of the 5% coupon, 25-year maturity bond falls to 7% by the end of the first year and that the investor sells the bond after the first year. If the investor's federal plus state tax rate on interest income is 30% and the combined tax rate on capital gains is 20%, what is the investor's after- tax rate of return?

Suppose that the yield to maturity of the 5% coupon, 25-year maturity bond falls to 7% by the end of the first year and that the investor sells the bond after the first year. If the investor's federal plus state tax rate on interest income is 30% and the combined tax rate on capital gains is 20%, what is the investor's after- tax rate of return?

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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4. 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?
You buy a zero couponbond at the beginning of the year that has a face value of $1,000, a YTM of 7 percent,and 25 years to maturity.If you hold the bond for the entire year, how much in interest income will you have to declare on your tax return? without excel please manually
You bought a 10-year, 5% coupon bond for $1,000 and sold it 1 year later for $1,100. 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?
Suppose that your marginal tax rate is 20%. Your after-tax return from holding (to maturity) a one-year corporate bond with a yield to maturity of 10% is nearest whole number). (Round your response to the
You buy a zero coupon bond at the beginning of the year that has a face value of $1,000, a YTM of 13 percent, and 10 years to maturity. You hold the bond for the entire year. Assume semiannual compounding. How much interest income will you have to declare on your tax return?
To find the after-tax interest rate, the before tax interest rate is multiplied by If the current and expected future one-year interest rates are 5%, 6%, 7%, using the expectations theory of the term structure, the three-year interest rate is ___? If the current and expected future one-period interest rates are 5%, 6%, 7%, 5% and 5%, and the liquidity premium is 0.4%, the five-period interest rate is A steep yield curve indicates that interest rates are expected to future. in the An inverted yield curve may be due to a Federal Reserve policy of increasing short- term interest rates to fight what economic problem?
You are considering investing in a bond that matures 20 years from now (the par value of the bond is $1,000). It pays an annual end-of-year coupon rate of interest of 7.25 percent, or $72.5 per year. The bond currently sells for $900. Your marginal income tax rate (applied to interest payments) is 28 percent. Capital gains are taxed at the same rate as ordinary income. What is your after-tax rate of return if you buy this bond today and hold it until maturity? Use Table II and Table IV or a financial calculator to answer the question. Round your answer to the nearest whole number.
If you purchased a bond one year ago for $1000 and just sold it for $1100 after receiving the $50 annual coupon payment, then what was your real return on the investment if theinflation rate was 2.1% for the same year?
Suppose you purchase a 10-year bond with 6% annual coupons. You hold the bond for four years and sell it immediately after receiving the fourth coupon. If the bond's yield to maturity was 4.01% when you purchased and sold the bond, a. What cash flows will you pay and receive from your investment in the bond per $100 face value? b. What is the internal rate of return of your investment? Note: Assume annual compounding. The cash flow at time 1-3 is $ (Round to the nearest cent. Enter a cash outflow as a negative number.) (Round to the nearest cent. Enter a cash outflow as a negative number.) The cash outflow at time 0 is $ The total cash flow at time 4 (after the fourth coupon) is $ negative number.) b. What is the internal rate of return of your investment? (Round to the nearest cent. Enter a cash outflow as a
Suppose you invest in a municipal bond that pays a yield of 149%. If your marginal tax is 15%, what is the equivalent yield on the taxable bond? (write your answer in percentage and round it to 2 decimal places) A Moving to another question will save this response. «» DELL
5. You bought a 10-year, 5% coupon bond for $1,000 and sold it 1 year later for $1,100. 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? (Round your answer to the nearest whole percent.)
Suppose you purchase a 10-year bond with 6.4% annual coupons. You hold the bond for four years, and sell it immediately after receiving the fourth coupon. If the bond's yield to maturity was 5.5% when you purchased and sold the bond, a. what cash flows will you pay and receive from your investment in the bond per $100 face value? b. what is the annual rate of return of your investment? a. What cash flows will you pay and receive from your investment in the bond per $100 face value? The cash flows from the investment are shown in the following timeline: (Round to the best choice below.) A. Year 0 1 2 3 4 Cash Flows $110.90 $6.40 $6.40 $6.40 $104.50 B. Year 0 1 2 3 4 Cash Flows - $106.78 $6.40 $6.40 $6.40 $110.90 C. Year 0 2 3 4 Cash Flows $104.50 $6.40 $6.40 $6.40 $110.90 OD. Year 1 2 3 Cash Flows $106.78 $6.40 $6.40 $6.40 $110.90 b. What is the annual rate of return of your investment? The annual rate of return of your investment is %. (Round to one decimal place.)

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