You are considering investing in following bond:
Your income tax rate is 34 percent and your capital gains tax is effectively 10 percent. Capital gains taxes are paid at the time of maturity on the difference between the purchase price and par value.
What is your approximate post-tax yield to maturity on this bond?
A . 10.91%
B . 11.38%
C . 9.07%
D . 11.78%
Answer: A