HP 12C Discounted Notes

8.Key in the purchase date (MM.DDYYYY) and press .

9.Key in the assumed sell date (MM.DDYYYY) and press to find the after-tax yield (as a percentage).

10.For the same bond but different date return to step 8.

11.For a new case return to step 2.

Example: You can buy a 7% bond on October 1, 1981 for $70 and expect to sell it in 5 years for $90. What is your net (after-tax) yield over the 5- year period if interim coupon payments are considered as income, and your tax bracket is 50%?

(One-half of the long term capital gain is taxable at 50%, so the tax on capital gains alone is 25%)

	Keystrokes	Display
70	1	10.00	Purchase price.
90	2	90.00	Selling price.
7	3	7.00	Annual coupon rate.
25	4	25.00	Capital gains tax rate.
50	5	50.00	Income tax rate.
		10.01	Purchase Date.
10.011981
10.011986		8.53	% after tax yield.

Discounted Notes

A note is a written agreement to pay a sum of money plus interest at a certain rate. Notes to not have periodic coupons, since all interest is paid at maturity.

A discounted note is a note that is purchase below its face value. The following HP 12C program finds the price and/or yield* (*The yield is a reflection of the return on an investment) of a discounted note.

KEYSTROKES		DISPLAY
CLEAR	00-
1	01-	45 1

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