question archive Suppose you are the owner of a zero- coupon bond maturing in 30 years
Suppose you are the owner of a zero- coupon bond maturing in 30 years
Subject:FinancePrice: Bought3
Suppose you are the owner of a zero- coupon bond maturing
in 30 years. Suppose further that the current applicable discount rate is 10% (and for simplicity treat this zero as an annual bond. Note that in the US, Zero-coupon bonds are treated as semi-annual bonds). Calculate the current market price of the zero and, if the applicable tax rate is 20%, the taxes owed at the end of the next three years (assume the interest rates remain the same and that the par value of the STRIPS= 1000).
