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?© BrainMass Inc. brainmass.com June 3, 2020, 6:35 pm ad1c9bdddf
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 ...
The solution explains how to calculate the after tax return on a tax-free municipal bond