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# After tax return on a bond

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I need help with this problem regarding after-tax return on the bond to an investor in the 50% marginal income tax bracket. The second part of the problem is - What is the after tax return if the bond was a tax-free municipal bond?

A corporate bond is selling for \$950. It matures in a year, at which time the holder will receive \$1,000. In addition, the bond will pay \$50 in interest during the year. What would be the after-tax return on the bond to an investor in the 50% marginal income tax bracket? (Assume that capital gains do not receive preferential tax treatment.) What would be the after-tax return if the bond had been a tax-free municipal bond?

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The bond is seeling at 950. During the year the income to the bond holder is \$50 in interest and \$50 in capital gains. The total income is \$100. Given ...

#### Solution Summary

The solution explains how to calculate the after tax return on a tax-free municipal bond

\$2.19