Calculates the net redemption yield excluding capital gains tax (CGT) where the term to redemption is an integer number of years.
public double NetRedemptionYieldWithAccuracyWithExplicitTime( doubleprice, doublecoupon, doubletaxRate, intyearsToRedemption, doubleupperBound, doubleprecision );
Parameters
price
The current market price of the bond.
coupon
The annual coupon of the bond convertible half-yearly (that is, paid in half-yearly installments).
taxRate
The investor's rate of tax on income in decimal format (i.e. 1 percent = 0.01).
yearsToRedemption
The number of (whole) year until the redemption (or maturity) of the bond.
upperBound
The upper bound of the interval over which the yield will be sort. If you are unsure as to a suitable value then by setting this parameter to 2 you will cover all cases where the yield is less than 200 percent.
precision
The accuracy of the result. This is an internal parameter used by the equation solver algorithm, the smaller the precision required the more accurate the result but also the longer the computation will take. A suitable value for this parameter is 0.0001.
Remarks
That is, the yield of the bond is evaluated where the income tax of
the investor is taken into account (i.e. the gross yield minus the income tax) and there are an integer
number of years until the bond matures.
This procedure offers the same functionality as the
method (double, double, double, int)
except that here the internal equation solving algorithm parameters can be set. These parameters are the upper bound
of the yield over which the solution is searched and the precision of the returned result can be specified.
Remarks:
In order to find the net redemption yield we are required to solve an
equation of one variable (see PDF documentation for details). We find the solution of this equation
be applying a combination of the Bisection and Newton-Raphson methods where we can set the algorithm
parameters such as the upper bound of the solution and the precision used.
The net redemption yield is often used within the UK gilt market.