A 15-year zero coupon bond has a yield to maturity of 8 percent and a maturity value of R1,000.What is the amount of tax that an investor in the 30 percent tax bracket would pay during the first year of owning the bond?

Question

Quizplus · Accepted Answer

The bond's annual interest income is calculated using the formula: Maturity Value / (1 + Yield)^Years to Maturity. The interest income for the first year is R1,000 / (1.08)^15 - R1,000 / (1.08)^14. The tax is 30% of this interest income, which is approximately R7.57.

A 15-Year Zero Coupon Bond Has a Yield to Maturity