2003 #22, 2005 #20 after-tax return

[A-Head]

I'm a little confused on how to compute the after-tax return for bonds. Specifically, when to include the "built-in" price appreciation in the interest income.

2003 #22 does not include the price appreciation when calculating interest income.

Capital gains = (price bond is sold for at time 1 using new YTM) - (price at time 0 using original YTM).
Interest income = coupon pmts plus interest on coupons

2005 #20 includes the price appreciation when calculating interest income.

Capital gains = (price bond is sold for at time 1 using new YTM) - (price at time 1 using original YTM).
Interest income = "built-in" imputable interest

Does the price appreciation only apply to zero-coupon bonds? I didn't think this was the case.

[radrach]

interest income:
inputed on zero's AND bonds sold at discount, ie below face value.
coupon payments

capital gains:
price appreciation/depreciation above/beyond already taxed (or not yet taxed) as interest income.