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
Motivation - Behavioural Aspects of Standards Variance analysis and standards setting requires to be carried out like it motivates managers and other employees. It should not

Most corporations pay quarterly dividends on their common stock rather than annual dividends. Barring any unusual circumstances during the year, the board raises, lowers, or mainta

Value one stock using the dividend discount model of stock valuation with two periods of constant growth (not the simple one period growth model).  See chapter 18 of the textbook

Account Analysis Method of Cost Estimation By Utilizing account analysis, the accountant classifies and examines each ledger account like variable mixed or fixed. Into their v

Implementation of Re-Apportionment of Overheads The re-apportionment of service department costs may be implemented in a number of methods. The Two extremes are as a) Wh

DIFERENCE BETWEEN MARGINAL AND DIFFERENTIAL COSTING

DIFFERENTIAL COSTING Marginal costing is often confused with differential costing. The word 'DIFFERENTIAL COSTING' means 'a technique used in the preparation of adhoc informati

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

Behavioural Aspects of Standards Budgets and Standards rely heavily on the people who have to work to meet them. Since the detailed nature of standard costing and its involvem

Freshly Ground Investments have just made an investment of $550 000 in a new Toyota Hilux (with trailer) delivery vehicle. This vehicle will be used for deliveries and generate rev