Problem
A tax avoidance device that became popular in the late 1970s and early 1980s was the zero coupon bond. This was a bond that paid no interest. When the interest rate was 7 percent, a ten-year bond promising to pay $100 in 1990 would sell for $50 when issued. The government required the individual to impute the receipt of interest-to assume that one-tenth of the $50 gain that occurred between 1980 and 1990 occurred in each year; at the same time, the issuer of the bond could impute the payment of interest. If the two (the issuer of the bond and the purchaser) were in the same tax bracket, what would be the consequences of these imputed interest payments and receipts? If they were in different tax brackets?
The response should include a reference list. Double-space, using Times New Roman 12 pnt font, one-inch margins, and APA style of writing and citations.