A fixed-interest security bears interest of 10% per annumpayable half-yearly in arrear. The security will be redeemed at105% by five instalments, of equal nominal amount, on 31 Julyin each of theyears 2016 to 2020 inclusive. An investor, who isliable to income tax at the rate of 40%, purchasedthe entiresecurity on 31 July 2006, immediately following the interestpayment then due, at a price to obtain a net yield of 9% perannum effective. The present value of cash payable onredemption is ,Select one:a. 166.3O b. 154.5c. 188.045O d. 195.42e. 173.89

The question is based on valuation of fixed interest paying securities , which is calculated as…

A fixed-interest security bears interest of 10% per annum payable half-yearly in arrear. The security will be redeemed at 105% by five instalments, of equal nominal amount, on 31 July in each of theyears 2016 to 2020 inclusive. An investor, who is liable to income tax at the rate of 40%. purchasedihe entire security on 31 July 2006, immediately following the interest payment then due, at a price to obtain a net yield of 9% per annum effective. The present value of cash payable on redemption is Select one: a. 166.3 b. 154.5 O c. 188.045 d. 195.42 e. 173.89

A fixed-interest security bears interest of 10% per annum payable half-yearly in arrear. The security will be redeemed at 105% by five instalments, of equal nominal amount, on 31 July in each of theyears 2016 to 2020 inclusive. An investor, who is liable to income tax at the rate of 40%. purchasedihe entire security on 31 July 2006, immediately following the interest payment then due, at a price to obtain a net yield of 9% per annum effective. The present value of cash payable on redemption is Select one: a. 166.3 b. 154.5 O c. 188.045 d. 195.42 e. 173.89

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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