Question

Several years ago you purchased a zero coupon Treasury bond. At the end of last year its YTM was 4% and it had 12 years until maturity. At the end of this year the YTM has fallen to 2% and you decide to sell it. What is your Federal tax liability for this year? Note: Answer in dollars, rounding to the nearest cent. Assume your marginal tax rate is 25% and the long term capital gains tax rate is 15%

Answer #1

Particulars | Face value | × discount rate | Amount |

Selling price | $ 1,000 | 0.757875 | $ 757.88 |

Less: basis | $ 1,000 | 0.555265 | $ 555.26 |

Capital gain | $ 202.61 | ||

× capital gain tax rate | 15% | ||

Federal taxes payable | $ 30.39 |

Federal taxes payable are $30.39

Selling price discount rate is calculated using rate 2% and period 14 years.

Basis discount rate is calculated using 4% rate and 15 years time.

Please rate.

several years ago you purchase a zero coupon treasury bond. at
the end of the last year its YTM was 4% and it had 15 years until
maturity. at the end of this year the YTM had fallen to 2% and you
decide to sell it. what is your federal tax liability? assume a
marginal tax rate of 25% and long term capital gains tax rate is
15%.

4. Two years ago, you purchased a zero coupon bond with a 5-year
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