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# A newly issued bond pays its coupons once a year. Its coupon rate is 4.9%, its...

## Question

###### A newly issued bond pays its coupons once a year. Its coupon rate is 4.9%, its...

A newly issued bond pays its coupons once a year. Its coupon rate is 4.9%, its maturity is 10 years, and its yield to maturity is 7.9%.

a. Find the holding-period return for a one-year investment period if the bond is selling at a yield to maturity of 6.9% by the end of the year. (Do not round intermediate calculations. Round your answer to 2 decimal places.)

Holding-period return             %

b. If you sell the bond after one year when its yield is 6.9%, what taxes will you owe if the tax rate on interest income is 40% and the tax rate on capital gains income is 30%? The bond is subject to original-issue discount (OID) tax treatment. (Do not round intermediate calculations. Round your answers to 2 decimal places.)

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