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sir for the valuation of the bond, if the tax rate was given, would we have included the interest receipt each year net of tax? or would we have included it just like the answer?
like in year 1, payment now is 8. if tax say 30% was written, would we have included payment in year 1 as 8(1-0.3)?
Patrick: Your answer is correct, but please don’t answer in the Ask the Tutor Forum (but do please help people in the other P4 forum)
Tasnuva: It is investors who determine the market value of bonds and they are not affected by company tax. Have you not watched the free lectures, because I do stress this point?
If YTM is increasing the investors are getting a higher return.
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