Find the reciprocal of your tax rate, or in other words, use (1 – your tax rate). If you pay 25 percent tax, for example, your reciprocal would be (1 - .25) = .75, or 75 percent. Divide this into the yield on the tax-free bond to find out the tax-equivalent yield. Bond X is a premium bond making semiannual payments. The bond pays a coupon rate of 7.4 percent, has a YTM of 6.8 percent, and has 13 years to maturity. Bond Y is a discount bond making semiannual payments. This bond pays a coupon rate of 6.8 percent, has a YTM of 7.4 percent, and also has 13 years to maturity. Assume a par value of $1,000. Compute Bond Price Compute the price of a 4.75 percent coupon bond with 15 years left to maturity and a market interest rate of 6.25 percent. (Assume interest payments are semi-annual and par value is $1,000.) Is this a discount or premium bond? Discount Premium Bond Yield. Use the same approach if you wish to determine the annual equivalent yield, or the yield to maturity, on a bond. Use the formula Y = (1+C/PV)^n - 1, where C is the coupons, or interest While many tax-exempt bonds may appear to have a lower interest rate at first glance, you really won’t be able to determine your real rate of return until you calculate the tax-equivalent yield. This can help you make a more informed decision when determining how to invest when attempting to target a specific rate of return in your portfolio. Bankrate.com provides a FREE tax equivalent yield calculator and other TEY calculators to view the yield of your municipal bonds. Understanding current interest rates ; if the bond was working out an equivalent compound interest rate for premium bonds Basically I started with £x in bonds 4.5 years ago, I won 7 x £25 in prizes at random intervals and now have £Y in bonds (the winnings are reinvested automatically as more premium bonds).
A premium bond is a bond trading above its face value or in other words; it costs more than the face amount on the bond. A bond might trade at a premium because its interest rate is higher than
9 Nov 2017 NS&I has today announced that it is increasing interest rates across its variable rate product range, including Premium Bonds, from 1 30 May 2014 "The equivalent interest rate is 1.3%, but the payout is tax-free so it works out more if you pay tax. But that doesn't mean you'll get 1.3% of your 10 Mar 2020 Yield maintenance is a prepayment premium that allows investors to a borrower or bond issuer to refinance its debt at a lower interest rate. 24 Feb 2020 In general, the higher the duration, the more a bond's price will drop as interest rates rise (and the greater the interest rate risk). As a general rule, 23 Jul 2013 The interest rate on Premium Bonds will be reduced 0.2% from 1.5% to 1.3% from 1 August as NS&I tries to keep within the financing target set by
Premium Bond: Compound Interest Rate Calculator. Here is a calculator, which calculates how much money you could have generated through a compound interest product instead of Premium Bonds. You simply enter the amount you currently have invested in the Premium Bonds, the best compound interest rate available in the banking market, and the
25 Feb 2020 It means all savings interest is automatically paid tax-free and you'll only need to pay tax on it if you're a basic 20% rate taxpayer earning more This is a summary of our latest interest rates. Premium Bonds prize fund rate AER, (Annual Equivalent Rate) illustrates what the annual rate of interest would