Reference no: EM13934399
A newly issued bond pays its coupons once a year. Its coupon rate is 5.3%, its maturity is 20 years, and its yield to maturity is 8.3%.
a. Find the holding-period return for a one-year investment period if the bond is selling at a yield to maturity of 7.3% by the end of the year. (Do not round intermediate calculations. Round your answer to 2 decimal places.)
Holding-period return %
b. If you sell the bond after one year when its yield is 7.3%, what taxes will you owe if the tax rate on interest income is 40% and the tax rate on capital gains income is 30%? The bond is subject to original-issue discount (OID) tax treatment. (Do not round intermediate calculations. Round your answers to 2 decimal places.)
Tax on interest income $
Tax on capital gain $
Total taxes $
c. What is the after-tax holding-period return on the bond? (Do not round intermediate calculations. Round your answer to 2 decimal places.) After-tax holding-period return %
d. Find the realized compound yield before taxes for a two-year holding period, assuming that (i) you sell the bond after two years, (ii) the bond yield is 7.3% at the end of the second year, and (iii) the coupon can be reinvested for one year at a 3.3% interest rate. (Do not round intermediate calculations. Round your answer to 2 decimal places.)
Realized compound yield before taxes %
e. Use the tax rates in part (b) to compute the after-tax two-year realized compound yield. Remember to take account of OID tax rules. (Do not round intermediate calculations. Round your answer to 2 decimal places.)
After-tax two-year realized compound yield %
|
What are the current carrying costs
: Louise Manufacturing uses 2,200 switch assemblies per week and then reorders another 2,200. The relevant carrying cost per switch assembly is $8.50, and the fixed order cost is $1,100. What are the current carrying costs?
|
|
Perform data mining steps on the given dataset
: You will perform data mining steps (data preprocesing, classification) on this dataset and write your results in a project report in the form of a IEEE conference paper.
|
|
Assets-liabilities and equity-total revenue and net income
: Select one (1) U.S. publicly traded company and review its most recent Annual Report. Use the Income Statement and Balance Sheet to determine the changes in: assets, liabilities, and equity, total revenue and net income.
|
|
What is your expected rate of return on stock
: You recently purchased a stock that is expected to earn 25 percent in a booming economy, 14 percent in a normal economy, and lose 5 percent in a recessionary economy. There is a 23 percent probability of a boom, a 62 percent chance of a normal econom..
|
|
Find holding-period return for one-year investment period
: A newly issued bond pays its coupons once a year. Its coupon rate is 5.3%, its maturity is 20 years, and its yield to maturity is 8.3%. Find the holding-period return for a one-year investment period if the bond is selling at a yield to maturity of 7..
|
|
Assume that the risk premium
: Grammy phone is a cellular firm that reported a net income of $50 million in the most recent financial year. The firm had $1 billion in debt, on which it reported interest expenses of $100 million in the most recent financial year. Also assume that t..
|
|
According to the expectations hypothesis
: Consider the following $1,000 par value zero-coupon bonds: Bond Years until Maturity Yield to Maturity A 1 4.9% B 2 5.9 C 3 6.4 D 4 6.9 According to the expectations hypothesis, what is the market’s expectation of the one-year interest rate three yea..
|
|
The yield to maturity on one-year zero-coupon bonds
: The yield to maturity on one-year zero-coupon bonds is 7.8%. The yield to maturity on two-year zero-coupon bonds is 8.8%. What is the forward rate of interest for the second year? If you believe in the liquidity preference theory, is your best guess..
|
|
Identify an ict-related ethical issue from a media article
: Construct a diagram to map the arguments about a moral claim that you have identified in the article/case study - identify an ICT-related ethical issue from a media article or case study.
|