A 15-year,$1,000 face value,zero coupon bond has a yield to maturity of 8%.What is the amount of tax an investor in the 33% tax bracket will pay the first year of the bond?
A)$ 8.32
B)$ 8.74
C)$ 9.18
D)$ 9.63
E)$10.12

Question

Quizplus · Accepted Answer

The correct answer is A because the amount of tax an investor in the 33% tax bracket will pay the first year of the bond is $8.32. This is calculated as follows:Tax = (Yield to maturity * Face value) * Tax bracket= (0.08 * 1,000) * 0.33= $8.32

A 15-Year,$1,000 Face Value,zero Coupon Bond Has a Yield to Maturity