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CODE 5 AFTER-TAX CALCULATIONS
The TRADER II has the added capability of performing after-tax calculations in Security Code 5.
The basic operating procedures remain the same as in other Codes, however, the nature of discount
securities changes the results obtained using the after-tax functions.
AFTER TAX DISCOUNT RATE
AFTER-TAX provides the after-tax discount rate (not yield); that is the effective discount rate after tax
considerations.
BEFORE-TAX PRICE FROM AFTER-TAX DISCOUNT RATE
DISPLAY, AFTER-TAX accepts the entry of a desired after-tax discount rate (not yield), and calculates
the before-tax discounted price which would be paid to obtain the entered after-tax discount rate.
EXAMPLE:
Use the previous Treasury Bill example to perform the after-tax functions. With an
income tax rate of 28%, find the price needed to obtain a 4% after-tax discount rate. Find the actual after-
tax discount rate and effective yield for the bill as calculated.
ENTER
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4
AFTER-TAX EFFECTIVE YIELD
For comparison to securities in other codes, the after-tax effective yield (coupon equivalent yield can be
calculated by the following sequence.
ENTER
PRESS
RESULTS DISPLAYED
DISPLAY
Effective Yield 8.27%
TO
YIELD
PRESS
RESULTS DISPLAYED
TAX
Inc Tax 28% Cap Gains 0%
RATE
DISPLAY
B-Tax Price 96.1265432
AFTER
TAX
PRESS
RESULTS DISPLAYED
AFTER
After-Tax Yield 5.616%
TAX
TO
Price 96.0844000 (M)
PRICE
DISPLAY,
Effective Yield 5.879%
TO
YIELD
MONROE TRADER II
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