Problem: For each of the $1000 par-value bonds below, assuming annual interest payment and a 40% taxe rate, calculate the after-tax cost to maturity using the approximation formula.
|
|
|
Discount (-) or |
Coupon Interest |
| Bond |
Life |
Underwriting fee |
Premium (+) |
Rate |
| A |
20 yrs |
$25 |
($20) |
9% |
| B |
16 |
40 |
$10 |
10 |
| C |
15 |
30 |
($15) |
12 |
| D |
25 |
15 |
par |
9 |
| E |
22 |
20 |
($60) |
11 |