2. Fill out the table below. (80 points)
The first three columns are inputs. P and CR are, respectively, the price and coupon rate of an annual 1.5-year coupon bond. TR is the marginal tax rate. The face value is $1,000.
The last four columns are outputs. yp is the pretax yield. ya is the after-tax yield implied by the potentially-flawed formula. ya' is the after-tax yield assuming capital gains are only taxed at maturity and coupon payments are taxed normally. ya'' is the after-tax yield assuming capital gains are only taxed at maturity and coupon payments are tax-exempt.
I have already filled out the first row; it is the example we worked through in class. The goal for this exercise is to see how these yields change as the inputs change.
P	CR	TR	yp	ya	ya'	ya''
$900	10%	40%	17.894%	10.736%	10.878%	15.234%
$1,000	10%	40%	?	?	?	?
$900	17%	40%	?	?	?	?
$900	10%	47%	?	?	?	?