| Zero coupon bond Answer: b Diff: E
7A-137. At the beginning of the year, you purchased a 7-year, zero coupon bond with a yield to maturity of 6.8 percent. The bond has a face value of $1,000. Your tax rate is 30 percent. What is the total tax that you will have to pay on the bond during the first year?
a. $20.40
b. $12.87
c. $30.03
d. $13.75
e. $11.45
Medium:
Zero coupon bond Answer: d Diff: M
7A-138. You just purchased a zero coupon bond with a yield to maturity of
9 percent. The bond matures in 12 years, and has a face value of $1,000. Assume that your tax rate is 25 percent. What is the dollar amount of taxes you will pay at the end of the first year of holding the bond?
a. $5.00
b. $6.00
c. $7.00
d. $8.00
e. $9.00
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