You just purchased a 12-year,$1,000 face value,zero coupon bond with a yield to maturity of 9.00%.If your tax rate is 20.00%,how much in taxes will you have to pay at the end of the first year of holding the bond? Do not round your intermediate calculations.

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First, calculate the bond's value after one year. A zero-coupon bond's price is calculated as $P = \frac{F}{(1 + r)^n}$, where $P$ is the price, $F$ is the face value, $r$ is the yield to maturity, and $n$ is the number of years to maturity. After one year, the bond has 11 years left to maturity, so the price after one year is $P_1 = \frac{1000}{(1 + 0.09)^{11}} = \frac{1000}{2.5804} = \$387.54$.The initial purchase price is $P_0 = \frac{1000}{(1 + 0.09)^{12}} = \frac{1000}{2.81317} = \$355.54$.The increase in value, which is considered interest income for tax purposes, is $P_1 - P_0 = \$387.54 - \$355.54 = \$32$.The tax due on this interest income at a 20% tax rate is $0.20 \times \$32 = \$6.40$.

You Just Purchased a 12-Year,$1,000 Face Value,zero Coupon Bond with a Yield