ABC Ltd.'s bonds sell for 90% of their face value (assume face value = $100). These bonds come with a coupon rate of 5%. The bonds will mature in 20 years and will pay the coupon semi-annually. Any interest income attracts a 15% tax for the investor. Determine the after-tax YTM for the investor.
ABC Ltd.'s bonds sell for 90% of their face value (assume face value = $100). These bonds come with a coupon rate of 5%. The bonds will mature in 20 years and will pay the coupon semi-annually. Any interest income attracts a 15% tax for the investor. Determine the after-tax YTM for the investor.
Chapter6: Fixed-income Securities: Characteristics And Valuation
Section: Chapter Questions
Problem 16P
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ABC Ltd.'s bonds sell for 90% of their face value (assume face value = $100). These bonds come with a coupon rate of 5%. The bonds will mature in 20 years and will pay the coupon semi-annually. Any interest income attracts a 15% tax for the investor. Determine the after-tax YTM for the investor.
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