Problemannes marginal income tax rate is 20 percent she, Ask an Expert

Accounting

Problem:

Anne's marginal income tax rate is 20 percent. She purchases a corporate bond for $20,000 and the maturity, or face value, of the bond is $20,000.

Required:

Question 1: If the bond pays 8 percent per year before taxes, what is Anne's annual after-tax rate of return from the bond if the bond matures in one year?

Question 2: What is her annual after-tax rate of return if the bond matures in 10 years?

Note: Provide support for your rationale.

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Accounting Basics, Accounting

Category:- Accounting Basics
Reference No.:- M91172757

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