Suppose that the yield to maturity of the 4% coupon, 35-year maturity bond falls to 7% by the end of the first year and that the investor sells the bond after the first year. If the investor’s federal plus state tax rate on interest income is 35% and the combined tax rate on capital gains is 25%, what is the investor’s after-tax rate of return?

Answer rating: 100% (QA)

The investor would have sold the bond after the first year at Yield to Maturity which is ... View the full answer