Suppose that the yield to maturity of the 4% coupon, 35-year maturity bond falls to 6% 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 35% and the combined tax rate on capital gains is 25%, what is the investor's after-tax rate of return?

Suppose that the yield to maturity of the 4% coupon, 35-year maturity bond falls to 6% 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 35% and the combined tax rate on capital gains is 25%, what is the investor's after-tax rate of return?

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter5: The Time Value Of Money

Section: Chapter Questions

Problem 17P

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