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?

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?

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








Answer: D


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