Problem 5 Government bonds with the face value of $10,000 which mature in 10 years are...
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Problem 5 Government bonds with the face value of $10,000 which mature in 10 years are being sold today for $7,000. By purchasing the bonds, at the end of each year (until maturity) the owner receives an 8 percent annual, taxable interest based on the face value. Assuming a tax rate of 15% on capital gains and 38% on ordinary income, determine the annual after-tax rate of return of this investment. Problem 5 Government bonds with the face value of $10,000 which mature in 10 years are being sold today for $7,000. By purchasing the bonds, at the end of each year (until maturity) the owner receives an 8 percent annual, taxable interest based on the face value. Assuming a tax rate of 15% on capital gains and 38% on ordinary income, determine the annual after-tax rate of return of this investment.
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