Question: 5. ABC, Inc. issues a split-coupon $1,000 bond that matures in seven years. Interest payments are $80 a year (8%) and start after three years

5. ABC, Inc. issues a split-coupon $1,000 bond that matures in seven years. Interest payments are $80 a year (8%) and start after three years have elapsed. The bond initially sells for a discount 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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