• We are pleased to announce that the winner of our Feedback Prize Draw for the Winter 2024-25 session and winning £150 of gift vouchers is Zhao Liang Tay. Congratulations to Zhao Liang. If you fancy winning £150 worth of gift vouchers (from a major UK store) for the Summer 2025 exam sitting for just a few minutes of your time throughout the session, please see our website at https://www.acted.co.uk/further-info.html?pat=feedback#feedback-prize for more information on how you can make sure your name is included in the draw at the end of the session.
  • Please be advised that the SP1, SP5 and SP7 X1 deadline is the 14th July and not the 17th June as first stated. Please accept out apologies for any confusion caused.

UK SEP'05-Q-10 price of bond

D

deepakraomore

Member
1) In the question, the income tax only on coupon is given, while calculting the price it is not considered, why?
2) after 8 years bond is sold to other investor who pays the income tax on coupon, in this solution the income tax is considered, why?
3) finally, while calculating the annual effective interest for 1st investor, the incime tax is considered, why?

Is there any specific theory for this or This is the Mistake by examiner?

OR THIS THE MISTAKE?

Need help on this topic.....
 
The question gives the GROSS redemption yield, so you do not consider tax in the first part.

The second part gives the NET redmption yield, so you do consider tax for that calculation.
 
Back
Top