Suppose you bought a bond from Apple Inc. for $100 in 2009, in 2019 you sold...
Homework Answers
A bond from Apple Inc. for $100 in 2009, in 2019 sold at $400. If there is 100% inflation :
1) The pre-tax return :
In 2009, bond from Apple Inc. = $100
In 2019, Apple Inc. bond sold at = $400
The difference is ( $400 - $100 ) $300, which is the pre- tax return without inflation .
100% Inflation
To buy the same commodity, a person has to pay double price of that commodity. That is , cost of a bond from Apple Inc. increases from $100 to $200.
Therefore, bond from Apple Inc. would be :
Finally, $100 / 100% is the pre-tax return.
2) The after tax rate :
Therefore, 40% is the after tax rate.
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