This morning (9 June 2021) siri purchased a j2 =2% p.a. AustralianTreasury bond, maturing on 9 June 2031.  Siri is liable for 17% tax oninterest and capital gains. Assume such tax is paid immediately on receiptof taxable funds.


a. Draw a carefully labelled cash flow diagram, from siriperspective, that models this transaction.

b. If siri paid $84.277 (per $100 face value) to purchase thisbond, give the approximate yield on the transaction, using the bondsalesperson's formula. For the purposes of this calculation, ignore alltax. Give your answer as an annual (j2) rate.

c. If siri paid $84.277 (per $100 face value) to purchasethis bond, calculate the approximate yield on the transaction, usinglinear interpolation. For the purposes of this calculation, ignore all
tax. Give your answer as an annual (j2) rate.

Answer rating: 100% (QA)

a Cash Flow Diagram gherkin Copy 9 June 2021 9 June 2031 Interest Payment 2 pa after tax V V 84277 b ... View the full answer