Calculating market yield for bonds

CFA Level I Fixed Income
#1

Pre-tax After-tax

Year Year

0 -95 0 -95

1 4 1 3.32

2 4 2 3.32

3 4 3 3.32

4 104 4 103.32

IRR 5.4% IRR 4.7%

With tax rate at 17%, I have calculated after-tax coupon payments to be 4 x 0.83 = 3.32. The second table gives me after-tax market yield of the bond at 4.7% whereas the first table gives me 5.4% x 0.83 = 4.5%. Which method is correct and why?

Thanks

#2

I think the second method is more accurate because it deals with after-tax cash-flows (although both answers are pretty close).

#3

How much tax did you pay on the (100 -95)??? :bulb:

#4

Thanks.