An investor purchases a ten year bond at issue which will be redeemed at par. The Bond
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Question:
An investor purchases a ten year bond at issue which will be redeemed at par. The Bond pays coupons of 5% per annum annually in arrears and the investor pay both income and capital gains tax of 20%.
(i) Calculate the purchase price of the bond per €100 nominal for the investor to achieved a rate of return of 8% per annum effective.
(ii) If the investor expects to achieve a real rate of return on the bond of 2% per annum effective calculate the annual rate of inflation expected by the investor.
Related Book For
Income Tax Fundamentals 2013
ISBN: 9781285586618
31st Edition
Authors: Gerald E. Whittenburg, Martha Altus Buller, Steven L Gill
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