Question 1 [13 marks] Government issued an index linked bond on 1st January 2020 which will be redeemed on 31st December 2022. The bond had a nominal coupon rate of 7% per annum payable half- yearly in arrears and the nominal redemption rate is 100%. The coupon and redemption proceeds are index linked and are indexed according to the increase in the retail price index (RPT) between 6 months before the bond issue date and 6 months before the coupon or redemption payment dates. The value of the RPI in the relevant month is: Date RPI 30th June, 2019 100 31st December, 2019 104.2 30th June, 2020 106.3 31st December, 2020 111.9 Date 30th June, 2021 31st December, 2021 30th June, 2022 31st December, 2022 RPI 112 114.5 119.8 125.5 An investor purchased R1, 500, 000 nominal of the bond at the issue date, and held it until it was redeemed. The issue price was R94 per R100 nominal. (1) Calculate all the cashflows to the investor before tax. The investor is subject to the following tax payable immediately when the income is received: Income tax at the rate of 27% and Capital gain tax at a rate of 34%. When calculating the amount of capital gain which is subject to tax, the price paid for the investment is indexed in line with the increase in RPI between the month in which the investment was purchased and the month in which it was redeemed. The investor is subject to the following tax payable immediately when the income is received: Income tax at the rate of 27% and Capital gain tax at a rate of 34%. . When calculating the amount of capital gain which is subject to tax, the price paid for the investment is indexed in line with the increase in RPI between the month in which the investment was purchased and the month in which it was redeemed. a) Calculate the investor's capital gain tax liability in respect of this investment [2] b) Calculate the effective net real yield per annum to the investor. [7] END OF PRE-WORK