A fixed interest stock with an optional redemption date at any time between 8 and 16 years from the date of issue is redeemable at 108%. It pays coupons of 6.5% per annum half yearly in arrears. An investor, subiect to 28% income tax and 25% capital gains tax, purchases with-dividend 4 months after issue a £25,000 nominal of the bond and obtains a net effective yield of 6.0% per half-year. Calculate, to 2 decimal places, the price paid by the investor.
A fixed interest stock with an optional redemption date at any time between 8 and 16 years from the date of issue is redeemable at 108%. It pays coupons of 6.5% per annum half yearly in arrears. An investor, subiect to 28% income tax and 25% capital gains tax, purchases with-dividend 4 months after issue a £25,000 nominal of the bond and obtains a net effective yield of 6.0% per half-year. Calculate, to 2 decimal places, the price 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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A fixed interest stock with an optional redemption date at any time between 8 and 16 years from the date of issue is redeemable at 108%. It pays coupons of 6.5% per annum half yearly in arrears. An investor, subiect to 28% income tax and 25%
Calculate, to 2 decimal places, the price paid by the investor.
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