Question: Molly Matters Inc. issues a split-coupon $1,000 bond that matures in seven years. Interest payments are $80 a year (8 percent) and start after three

Molly Matters Inc. issues a split-coupon $1,000 bond that matures in seven years. Interest payments are $80 a year (8 percent) and start after three years have lapsed. The bond initially sells for a discounted price of $794.
a) You are in the 30 percent income tax bracket and purchase the bond. What are the annual taxes owed on the interest?
b) You are in the 30 percent income tax bracket and purchase the bond in your IRA. What are the annual taxes owed on the interest?

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