Question

What is the tax on equivalent to hold on a support bond with a view to maturity at 4.1?

Answer 1

If the yield on the bond is 12%, you would not expect to pay more than $964 for the original $1,000 bond.

Step-by-step explanation:

In this case, the yield on the bond is 12%. This means that if you were to invest $964 in an alternative investment, you would receive $1,080 after one year. Because the yield on the bond is the same, you would not expect to pay more than $964 for the original $1,000 bond.