1. THE PRICING OF PREMIUM BONDS.
- Author
-
Livingston, Miles
- Subjects
BOND prices ,AMORTIZATION ,BONDS (Finance) ,RATE of return ,ZERO coupon securities ,TAX laws ,ECONOMETRIC models - Abstract
The article considers the pricing of premium bonds. The author seeks to determine the appropriate bond pricing equation for premium bonds under the assumption that taxpayers elect the amortization of the premium on a straight line basis as a deduction from regular taxable income. The author asserts that there are two parts of a bond pricing equation—one for discounts and par bonds and another for premium bonds. Additionally, the author discusses the coupon effect on yield to maturity and disproves Caks' method for deriving zero coupon discount rates from bond pairs.
- Published
- 1979
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