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
Important Points Regarding to the Variance Analysis Variance reporting concentrates on both with favourable and unfavourable variances. Normally unfavourable variances are pun

What are the strengths and weaknesses of the various costing methods and which would you recommend for a manufacturing enterpris? 2000word assay plus appendix


1. A company is considering a project that requires an initial investment of $100 million and will pay $20 million of each of the next 10 years, and nothing thereafter. The company

The following information is provided to you concerning Lydia Ltd as at 30 June 2012.  Assume a company tax rate of 30%. (i) The balance of rent received in advance in the balan

Vorticella can first be seen by the naked eye, b.ut to study it place a prepared slide under the microscope. Focus it under low power, and observe it. You can see a large number of

Shrinkage - Production Process This refers to a disappearance or loss of material inputs utilized throughout the production process. It happens mainly via the evaporation. Thi

Compute Over and Under Absorption of Variable and Fixed Overhead A company has a machine cost center for that the given information is available as a) Budget i. Budget


Why are the main contribution teams can make to an organisation? What are the conditions necessary in organisations if people are to work effectively in teams? * Describe what tea