Question: PART II: Multi-Part Short Answer. Use the information below to answer the following questions. Write your answers in the space provided. PART A (10 marks)

PART II: Multi-Part Short Answer. Use the information below to answer the following questions. Write your answers in the space provided. PART A (10 marks) Recently, April purchased a bond for $23,150 that pays a 6% coupon, payable semi-annually. The bond matures in 6 years at a par value of $25,000. She can reinvest the semi-annual coupon at 3.5% compounded annually. Her salary is $73,000 per year. Her marginal tax rate is 40%, which is also the applicable tax rate on interest income. The tax rate on dividend income is 22% and the tax rate on capital gain income is 20%. HINT: The first 2 questions below are before-tax, the last one is after-tax. 1. What is her annualized HPR betore if if she does not reinvest her investment income? (2 marks) Feve Rat it Pape 7 af: 2. What is her annualized HPR moveca if she reinvests her investment income? (2 marks) 3. What is her annualized HPR after-tax if she reinvests her investment income and taxes are paid annually? (4 marks)
Step by Step Solution
There are 3 Steps involved in it
Get step-by-step solutions from verified subject matter experts
