Assume the data shown below. What tax rate would make the law of one price hold? Assume that the capital gains tax is one-half the ordinary income tax. Assume that the periods shown are annual and that any capital gain or loss is realized at the time the bond matures.
|
Bond
|
1
|
2
|
Price
|
|
A
|
80
|
1,080
|
985
|
|
B
|
1,100
|
|
900
|
|
C
|
120
|
1,120
|
1,040
|