Today is January 1, 2000 and you just purchased a 7-year zero coupon bond with a face value of $1,000 and a yield to maturity of 6 percent. Your tax rate is 30 percent. How much in taxes will you have to pay on the bond the first year that you sell your bond at the end of the first year? (Assuming the market interest remains the same for the whole year) (Hint: Both coupon and realized capital gain are taxable.

Answer rating: 100% (QA)

Since the bond is a zerocoupon bond it does not pay any periodic interest coupon during its term Ins... View the full answer