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# A fixed interest stock pays an annual coupon of 7.7% per annum 4 monthly in arrears and is…

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A fixed interest stock pays an annual coupon of 7.7% per annum 4 monthly in arrears and is redeemed at 92% at any time between 8 and 20 years from the date of isssue at the option of the borrower. Calculate, to 2 decimal places, the with-dividend price (per £150,000 nominal) 3 months before the first coupon payment that should be paid by an investor requiring a net redemption yield of 4.4% per annum effective Assume that the investor is subject to income tax at a rate of 20%. Answer: A fixed interest stock is redeemable at 114% at the option of the borrower at any time between 12 years and 18 years from the date of issue. The coupon rate is 5.6% per annum payable quarterly in arrears. What price should be paid per £140,000 nominal by an investor subject to both income tax and capital gains tax at rates of 24% and of 30%, respectively, wishing to achieve a net effective yield of 4.0% per annum? Express, to 2 decimal places, the price that should be paid by the investor.