1. Investor D purchased a bond exactly one year ago that was yielding 6% at the time of purchase. D is in the 30% tax bracket on his personal income. It is now one year later and the inflation rate for the year was 2.1%. As a result, what is the after-tax, real rate of return from owning the bond?
2. Consider 2 securities: Asset 1 is a 4-year discount bond with an annual yield of 5%. Asset 2 is a 5-year discount bond with a yield of 6%. What is the implied or expected yield on a one year bond issued at the end of year 4?