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What is your after-tax rate of return

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Question - 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 8.75 percent, or $87.5 per year. The bond currently sells for $740. 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?

Reference no: EM133144119

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