You pay $550 to buy a bond that has 10 years to maturity. The bond has a
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Question:
You pay $550 to buy a bond that has 10 years to maturity. The bond has a coupon value of $1,000 and a coupon rate of 4%. Inflation is running at3% per year.
When the bond matures you will have to pay a 15% capital gains tax on the difference between your purchase price and the coupon value
a)What is the IRR for your cash flow in nominal terms?
b)What is the IRR after adjustment for inflation?
Related Book For
Foundations of Finance The Logic and Practice of Financial Management
ISBN: 978-0132994873
8th edition
Authors: Arthur J. Keown, John D. Martin, J. William Petty
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