a) A Zero Coupon Bond with face value £100 and maturity in 4 years is sold for £85. Find its (gross) yield. (b) The same bond as in (a) pays capital gains tax at 20%. What is its net yield? (c) Find the price of a bond whose face value is £100, it pays semi-annual coupons at a rate of 1.5% p.a., it has maturity in 3 years and produces a yield of 3% p.a. effective. The bond is redeemable at par.
a) A Zero Coupon Bond with face value £100 and maturity in 4 years is sold for £85. Find its (gross) yield. (b) The same bond as in (a) pays capital gains tax at 20%. What is its net yield? (c) Find the price of a bond whose face value is £100, it pays semi-annual coupons at a rate of 1.5% p.a., it has maturity in 3 years and produces a yield of 3% p.a. effective. The bond is redeemable at par.
Intermediate Financial Management (MindTap Course List)
13th Edition
ISBN:9781337395083
Author:Eugene F. Brigham, Phillip R. Daves
Publisher:Eugene F. Brigham, Phillip R. Daves
Chapter4: Bond Valuation
Section: Chapter Questions
Problem 8MC: Suppose a 10-year, 10% semiannual coupon bond with a par value of 1,000 is currently selling for...
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a) A Zero Coupon Bond with face value £100 and maturity in 4 years is sold for £85. Find its (gross) yield.
(b) The same bond as in (a) pays
(c) Find the price of a bond whose face value is £100, it pays semi-annual coupons at a rate of 1.5% p.a., it has maturity in 3 years and produces a yield of 3% p.a. effective. The bond is redeemable at par.
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