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An investor purchases a 30-year U.S government bond for $1,020. The bond's coupon rate is 9 percent and, it still had 14 years remaining until...

An investor purchases a 30-year U.S government bond for $1,020. The bond's coupon rate is 9 percent and, it still had 14 years remaining until maturity. If the investor holds the bond until it matures and collects the $1000 par value from the Treasury and his marginal tax rate is 39 percent (we assume that bond is taxable), what will be his after-tax (effective) yield to maturity? How would your answer change if the bond were a municipal bond?

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After tax yield to maturity for corporate bond =bond's coupon rate *(1-marginal tax rate )... View the full answer

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