Calculates the net redemption yield excluding capital gains tax (CGT) where the term to redemption is an integer number of years.
public double NetRedemptionYieldWithExplicitTime( doubleprice, doublecoupon, doubletaxRate, intyearsToRedemption );
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.
Return Value
The net redemption yield in decimal format (i.e. 0.01 = 1 percent).
Remarks
That is, the yield of the bond is evaluated where the income tax of
the investor is taken into account (i.e. gross yield minus the income tax) and there are an integer
number of years until the bond matures.
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 with pre-set
algorithm parameters such as the upper bound of the solution and the precision used. The upper
bound of the yield over which the solution of sort is 200 percent and the precision
used is 0.001, if the yield falls out side this range or you desire a different level
of precision then you should us the method
(double,double,double,int,double,double).
The net redemption yield is often used within the UK gilt market.