Today is January 1, 2003 and you just purchased a 7-year, zero coupon bond with a face value of $1,000 and a yield to maturity of 6 percent. Your tax rate is 30 percent. How much in taxes will you have to pay on the bond the first year that you hold it? a. $ 11.97 b. $211.49 c. $ 12.69 d. $ 39.90 e. $199.52
Debenture Valuation
A debenture is a private and long-term debt instrument issued by financial, non-financial institutions, governments, or corporations. A debenture is classified as a type of bond, where the instrument carries a fixed rate of interest, commonly known as the ‘coupon rate.’ Debentures are documented in an indenture, clearly specifying the type of debenture, the rate and method of interest computation, and maturity date.
Note Valuation
It is the process to determine the value or worth of an asset, liability, debt of the company. It can be determined by many processes or techniques. Many factors can impact the valuation of an asset, liability, or the company, like:
7A-11. Today is January 1, 2003 and you just purchased a 7-year, zero coupon
bond with a face value of $1,000 and a yield to maturity of 6 percent.
Your tax rate is 30 percent. How much in taxes will you have to pay
on the bond the first year that you hold it?
a. $ 11.97
b. $211.49
c. $ 12.69
d. $ 39.90
e. $199.52
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