On 1 January 2000 an investor purchased 10,000 nominal of a stock that pays coupons on 30 June and 31 December at the rate of 6% pa and is redeemable at par on 31 December 2012. The investor, who has no unused tax allowances, is liable for income tax payable at the rate of 40% on each 1 August in respect of coupons received during the previous calendar year. If the investor's net redemption yield on this investment is 5% pa effective, calculate the price paid for the holding. [5] An index-linked zero-coupon bond was issued on 1 January 2003 for redemption at par on 31 December 2007. The redemption payment was linked to a price inflation index with a 6-month time lag. Calculate the average money and real rates of return obtained by an investor who purchased 10,000 nominal of the stock on 1 January 2005 for 10,250 and held it until redemption. You are given the following values for the price index: Date Index Date Index 01.01.02 144 01.01.06 181 01.07.02 148 01.07.06 182 01.01.03 155 01.01.07 188 01.07.03 160 01.07.07 193 01.01.04 162 01.01.08 201 01.07.04 168 01.01.05 175 01.07.05 177 [4]