Question: Assume the data shown below. What tax rate would make the law of one price hold? Assume that the capital gains tax is one-half the

Assume the data shown below. What tax rate would make the law of one price hold? Assume that the capital gains tax is one-half the ordinary income tax. Assume that the periods shown are annual and that any capital gain or loss is realized at the time the bond matures.

Bond Price 80 1,100 120 985 900 1,040 1,080 1,120

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