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A PPN is issued with a NAV of $10

Accounting

A PPN is issued with a NAV of $10.00. and is redeemed at maturity at $15.00 five years later. Calculate the amount of tax per unit that an investor in a 40% marginal tax bracket will owe at maturity. a. $0.00 b. $0.40 c ?rl 2 
 

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Answer

d .

Explanation

Computation of Amount of Tax per Unit:

Given,

NAV of PPN = $10

PPN sold at $15

So,

Gain on Sale =  $15 - $10 = $5

Amount of Tax per Unit = Gain on Sale*Tax Rate

 = $5 * 40% 

Amount of Tax per Unit = $2.00

 

 

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