I don’t know why this confuses me and i did not even think about it the first time. Doing example 5 on page 289-290 of book 4 on private wealth. Question 6 goes over municipal bond where person holds until maturity. During month, interest rates fall and bond value up by 1%. Person (cary) doesn’t buy or sell during month but does receive 0.5% of bond value in interest. What is pre-tax and after-tax returns on muni?
Answer is = 1 + 0.5 = 1.5%.
Why are we adding in 1% if we never sold the bond. Nothing is realized yet.