Return with Changing Reinvestment Rate

Inputs
Initial investment
Bond price
Bond coupon rate
Expected annual inflation rate
Remaining life of bond (years)
Reinvestment rate for first period
Reinvestment rate for remaining years
Length of first period (years)
Ordinary income tax rate
Capital gains tax rate

$100,000
$900
8.00%
3.00%
20
6.00%
5.00%
10
35.00%
15.00%

Face amount of bonds purchased

$111,111

Yield to maturity (APR)

Final balance after all taxes
Effective annual rate of return (nominal)
Effective annual rate of return (real)

9.09%
$273,489
5.16%
2.10%

Accumulated interest income

Period-beg
Balance
Semi-annual periods
1
2
3
4
5
37
38
39
40

$0
$2,889
$5,834
$8,837
$11,898
$142,700
$147,908
$153,200
$158,578

Coupon Other interest

Received
Received
$4,444
$4,444
$4,444
$4,444
$4,444
$4,444
$4,444
$4,444
$4,444

$0
$87
$175
$265
$357
$3,567
$3,698
$3,830
$3,964

ed interest income
Income tax
Paid

Period-end
Balance

$1,556
$1,586
$1,617
$1,648
$1,680
$2,804
$2,850
$2,896
$2,943

$2,889
$5,834
$8,837
$11,898
$15,019
$147,908
$153,200
$158,578
$164,044