Calculate the net effective yield, Cost Accounting

A Government issued a number of index-linked bonds on 1 June 2000 which were redeemed on 1 June 2002.  Each bond had a nominal coupon rate of 3% per annum, payable half yearly in arrears, and a nominal redemption price of 100.  The actual coupon and redemption payments were indexed according to the increase in the Retail price index between 6 months before the bond issue date and 6 months before the coupon or redemption payment rates.

The values of the Retail price index in the relevant months were:

Date

Retail price index

December 1999

100

June 2000

102

December 2000

107

June 2001

111

December 2001

116

June 2002

120

(i) An investor purchased $100,000 nominal of bonds at the issue date, and held them until they were redeemed. The issue price was $94 per $100 nominal. Calculate all the investor's cash flows from this investment, before tax.

(ii) The investor is subject to income tax at a rate of 30% and capital gains tax at a rate of 20%.  When calculating the amount of capital gain which is subject to tax, the price paid for the investment is indexed in line with the increase in the Retail price index for the period between the month in which the investment was purchased and the month in which it was redeemed.

  • Calculate the investor's capital gains tax liability in respect of this investment.                                                                                                                       
  • Calculate the net (of all taxes) effective yield per annum obtained by the investor on these bonds.
Posted Date: 2/23/2013 7:40:38 AM | Location : United States







Related Discussions:- Calculate the net effective yield, Assignment Help, Ask Question on Calculate the net effective yield, Get Answer, Expert's Help, Calculate the net effective yield Discussions

Write discussion on Calculate the net effective yield
Your posts are moderated
Related Questions
Sony manufactures battery for Iphone 6+. The average costs to manufacture batteries are $4 for 10,000 ad $2.67 for 30,000. Assuming the total cost function is linear, what will be

The following data relate to three joint products:                                                                               A                 B                     C

Break-Even Analysis Break-even point is the volume of sales at that there is no loss or. Break-even charts graphically show the relationship of cost to profits and volume and

information for the year ended December 31, 2010: Direct labor $16,840 Direct material used 16,300 General and administrative expenses 14,240 Indirect production costs 16,780 Selli

Typical Causes of Labour Variances Labour Rate Variances a) Higher rates being paid than planned because of wage raise awards. b) Lower or Higher grade of work

L ABOUR VARIANCES Labour Cost Variance (LCV) Described by the ICMA, London, 'Labour cost variance is the variation between the standard direct wages specified for the pro

1. Pardee Company plans to sell 12,000 units during the month of August. If the company has 2,500 units on hand at the start of the month, and plans to have 2,000 units on hand at

Tlie subphylum is called Uniramia because of the presence of unbranched appendages. These animals have non-jointed mandibles, uubranched appendages without any palps. They have

difference between diffrential cost and marginal cost

what are the legal distinctions between a business combination, a merger, and a consolidation.