What do we mean by a net effective yield on a bond? I'm assuming 'net' means net of tax. Does this 'net effective yield' factor in only the return on the coupon payments of the bond, or also any capital gain selling the bond at redemption (i.e for example if the bond could be redeemed for say, £103 per £100 nominal)
Yes, you are correct, it is net of tax. The yield will include any gain made on redemption. When trying to find the net effective yield, we would need to set up an equation of value with PV of price equal to PV of coupon payments net of tax and redemption payments net of tax. Thanks Em
