Given the following bond information: Issuer coupon maturity price yield
Ontario 3.150 2022-Jun-02 99.00 3.28
What would be the taxable income on this bond if it were purchased at this price on June 1st and sold December 1st for a price of 103.00 and has face value of $20 000 and a semi-annual coupon payment?

Question

Given the following bond information: Issuer	coupon	maturity	price	yield
Ontario 	3.150 	2022-Jun-02 	99.00 	3.28
What would be the taxable income on this bond if it were purchased at this price on June 1st and sold December 1st for a price of 103.00 and has face value of $20 000 and a semi-annual coupon payment?

Quizplus · Accepted Answer

First, we need to calculate the semi-annual payment by multiplying the face value by the coupon rate and dividing by two:
$20,000 x 3.150% / 2 = $315

Next, we need to determine the number of semi-annual periods that have passed from June 2nd to December 1st, which is 1. We can use this information to calculate the interest earned:
$315 x 1 = $315

To calculate the taxable capital gain, we need to find the difference between the selling price and the purchase price, which is:
$20,600 - $19,800 = $800

The taxable capital gain is 50% of this amount, or $400. Therefore, the total taxable income is the sum of the interest earned and the taxable capital gain:
$315 + $400 = $715

Given the Following Bond Information: Issuer Coupon Maturity Price Yield