A newly issued bond pays its coupons once annually. Its couponrate is 8%, its maturity is 20 years, and its yield to maturity is10%.

a. Find the holding-period return for a 1-yearinvestment period if the bond is selling at a yield to maturity of9% by the end of the year. (Do not roundintermediate calculations. Round your answer to 2 decimalplaces.)

b. If you sell the bond after one year, whattaxes will you owe if the tax rate on interest income is 40% andthe tax rate on capital gains income is 30%? The bond is subject tooriginal-issue discount tax treatment. (Do not roundintermediate calculations. Round your answers to 2 decimalplaces.)

c. What is the after-tax holding-period returnon the bond? (Do not round intermediate calculations. Roundyour answer to 2 decimal places.)

d. Find the realized compound yieldbefore taxes for a 2-year holding period,assuming that (1) you sell the bond after two years, (2) the bondyield is 9% at the end of the second year, and (3) the coupon canbe reinvested for one year at a 3% interest rate. (Do notround intermediate calculations. Round your answerto 2 decimal places.)

e. Use the tax rates in (b) above to computethe after-tax 2-year realized compound yield. Remember totake account of OID tax rules. (Do not round intermediatecalculations. Round your answer to 2 decimalplaces.)