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
On a New product development process of making a new S3 STORAGE SIM card phone storage device for end users, forecast the following With full working and tabulations; a) With fu

Dropping a segment - George's Grill analyzes profitability of three operating units: restaurant, bar, and billiards room. Revenues, variable costs, and attributable fixed costs (wh

Manson Manufacturing applies manufacturing overhead at a rate of $30 per direct labour hour a)when during the year was this rate computed b)Describe briefly how this rate was


Accounts are prepared according to accounting concepts, principles and conventions. As final accounts are prepared on accrual basis, this becomes essential to subtract all those ex

Q. Can FCA Help Compare Opening A New Landfill Versus Building A Wasteto-Energy Incinerator? Ans. Yes. The principles of FCA are precisely the same no matter how you relat

i.   Identify the organization ii.  Identify the stakeholders iii. Give the major requirements for the IT application iv. Reflect on how difficult it was to do the require

HOW DOES IDLE CAPACITY EFFECT COST BEHAVIOR PATTERNS AND FACTORY OVERHEAD METHODS?

In the beach city of Santa Barbara, California, there are seven bathing suit stores, each with the same schedule of costs and each facing an identical demand curve. Swim N Style is

1. Why are marginal costs increasing? Why are they not always constant? You may give examples in some industries or just state two reasons at least.