A fixed interest stock is redeemable at 110% at the option of the borrower at any time between 9 years and 22 years from the date of issue. The coupon rate is 4.8% per annum payable quarterly in arrears. What ex-dividend price should be paid 2 months after issue per £500,000 nominal by an investor subject to both income tax and capital gains tax at rates of 25% and of 37%, respectively, wishing to achieve a net annual yield of 10.2%? Express, to 2 decimal places, the price that should be paid by the investor.
A fixed interest stock is redeemable at 110% at the option of the borrower at any time between 9 years and 22 years from the date of issue. The coupon rate is 4.8% per annum payable quarterly in arrears. What ex-dividend price should be paid 2 months after issue per £500,000 nominal by an investor subject to both income tax and capital gains tax at rates of 25% and of 37%, respectively, wishing to achieve a net annual yield of 10.2%? Express, to 2 decimal places, the price that should be paid by the investor.
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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Transcribed Image Text:A fixed interest stock is redeemable at 110% at the option of the borrower at any time
between 9 years and 22 years from the date of issue. The coupon rate is 4.8% per annum
payable quarterly in arrears. What ex-dividend price should be paid 2 months after issue
per £500,000 nominal by an investor subject to both income tax and capital gains tax at
rates of 25% and of 37%, respectively, wishing to achieve a net annual yield of 10.2%?
Express, to 2 decimal places, the price that should be paid by the investor.
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