A fixed interest stock is redeemable at 108% if it has an optional redemption date that falls within the range of 8 to 16 years from the date of issue. It pays half-yearly in arrears on coupons at a rate of 6.5% annually. An investor receives a net effective return of 6.0% per half-year when they buy a £25,000 nominal bond with-dividend four months after it is issued, subject to 28% income tax and 25% capital gains tax. Determine the investor's payment amount to two decimal places. correct answer = 12324.04 (no tables, only formulas)

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
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A fixed interest stock is redeemable at 108% if it has an optional redemption date that falls within the range of 8 to 16 years from the date of issue. It pays half-yearly in arrears on coupons at a rate of 6.5% annually. An investor receives a net effective return of 6.0% per half-year when they buy a £25,000 nominal bond with-dividend four months after it is issued, subject to 28% income tax and 25% capital gains tax.

Determine the investor's payment amount to two decimal places.

correct answer = 12324.04 (no tables, only formulas)

 

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