what are the annual taxes owed on the interest?

Question

Molly matters Inc issues a slipt coupon $1000 bond that matures in 7 years. Interest payments are 480 a year and start after 3 years have lapsed. The bond initially sells for a discounted price of $784. You are in the 30 percent income tax bracket and purchases the bond. what are the annual taxes owed on the interest?

Answer 1

 

Answer:    Computing the annual taxes owed on the interest is an estimated tax computation. The bondholder's tax "bracket" includes all taxable income reported on a tax return. You can estimate tax payments on the bond interest using 30%*$480. Corporate Bonds are debt instruments, issued in multiples of, at minimum, $1,000, where the Purchaser is the 'lender'... The Bond is the Corporation's promise to return the Purchaser's money (also called Principal) on a specified Maturity Date, to pay a Stated Rate of Interest, usually Semi-Annually.  Interest payments received from Corporate Bonds are taxable.