Question
In: Accounting
On 15 September 2020 you plan to buy a 6% p.a. Treasury bond maturing on 15...
On 15 September 2020 you plan to buy a 6% p.a. Treasury bond maturing on 15 September 2026.
1. How much would you pay to earn 7% p.a. on your transaction? Ignore taxation considerations.
2. How much would you pay to earn a net return of 7% p.a. on your transaction, allowing for tax on interest only of 30%? In this instance, assume tax on interest is paid immediately.
3. How much would you pay to earn a net return of 7% p.a. on your transaction, allowing for tax on interest and capital gains of 30%? In answering this question, you should assume that the tax on interest and capital gains is deferred by twelve months.
4. Allowing for tax on interest and capital gains of 30%, what would your net annual yield be if you paid $97.447 for the bond? Again, assume that the tax on interest and capital gains is deferred by twelve months
Please provide equations for each question not tables.
ANSWERS NEED TO BE IN EXCEL WITH INPUTS AND OUTPUTS LABELLED.
Solutions
ekkarill92 answered 1 year agoRelated Solutions
On 15 September 2020 you plan to buy a 6% p.a. Treasury bond maturing on 15...
On 15 September 2020 you plan to buy a 6% p.a. Treasury bond
maturing on 15 September 2026(Note that all the interest
rates given in this question are j2 rate)
a. How much would you pay to earn 7% p.a. on your transaction?
Ignore taxation considerations.
b How much would you pay to earn a net return of 7% p.a. on your
transaction, allowing for tax on interest-only of 30%? In this
instance, assume tax on interest is paid immediately....
On 15 September 2020 you plan to buy a 6% p.a. Treasury bond maturing on 15...
On 15 September 2020 you plan to buy a 6% p.a. Treasury bond
maturing on 15 September 2026.
a. How much would you pay to earn 7% p.a. on your transaction?
Ignore taxation considerations.
b. How much would you pay to earn a net return of 7% p.a. on
your transaction, allowing for tax on interest only of 30%? In this
instance, assume tax on interest is paid immediately.
c. How much would you pay to earn a net return...
On 15 September 2020 you plan to buy a 6% p.a. Treasury bond maturing on 15...
On 15 September 2020 you plan to buy a 6% p.a. Treasury bond
maturing on 15 September 2026.
a. How much would you pay to earn 7% p.a. on your transaction?
Ignore taxation considerations.
b. How much would you pay to earn a net return of 7% p.a. on
your transaction, allowing for tax on interest only of 30%? In this
instance, assume tax on interest is paid immediately.
c. How much would you pay to earn a net return...
Nathan purchased a 6-year Treasury bond with a coupon rate of j2 = 3.50% p.a. and...
Nathan purchased a 6-year Treasury bond with a coupon rate of j2
= 3.50% p.a. and a face value of $100 that matures at par. Coupons
can be reinvested at j2 = 3.2% p.a. for the first five and a half
years.
a. Calculate Nathan’s purchase price for this bond at a yield
rate of j2 = 3.1% p.a. (rounded to three decimal places).
b. Assume that Nathan held this bond to maturity to earn a total
realised compound yield...
The ask yield on a 6 percent coupon Treasury bond maturing in eight years is 5.488...
The ask yield on a 6 percent coupon Treasury bond maturing in
eight years is 5.488 percent. If the face value is $1,000, what
should be the QUOTED cost of the bond today (use semiannual
compounding)?
A. 103.2795
B. 107.2542
C. 106.8542
D. 108.5511
E. 104.3678
Consider a T-bond maturing in March 2020 with coupon payments on September 1st and March 1st....
Consider a T-bond maturing in March 2020 with coupon payments on
September 1st and March 1st. Assume that the
bond has $1000 par value, 10% coupon rate, and YTM = 12.5%. The
bond is traded on December 13, 2013.
What is the Accrued Interest?
What is the full price?
What is the flat price?
Consider a T-bond maturing in March 2020 with coupon payments on September 1st and March 1st....
Consider a T-bond maturing in March 2020 with coupon payments on
September 1st and March 1st. Assume that the bond has $1000 par
value, 10% coupon rate, and YTM = 12.5%. The bond is traded on
December 13, 2013. What is the Accrued Interest? What is the Full
price? What is the flat price?
Consider a T-bond maturing in March 2020 with coupon payments on September 1st and March 1st....
Consider a T-bond maturing in March 2020 with coupon payments on
September 1st and March 1st. Assume that the bond has $1000 par
value, 10% coupon rate, and YTM = 12.5%. The bond is traded on
December 13, 2013. What is the Accrued Interest? What is the full
price? What is the flat price?
What is the yield to maturing for a 6% coupon bond, with semi-annual payments, with 15...
What is the yield to maturing for a 6% coupon bond, with
semi-annual payments, with 15 years remaining to maturity and
selling at a price of $912.36?
You purchase a $13,000 3.875% Treasury bond maturing November 27, 2042. The bond is priced to...
You purchase a $13,000 3.875% Treasury bond maturing November
27, 2042. The bond is priced to yield 1.125% and settles January
10, 2017.
The base price of the bond is
Accrued Interest adds
The invoice price is thus
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