What is the purchase price of a bond bought on 1 March 2005,paying semi-annual coupons of 6.0% p.a.and maturing on 15 June 2007? The coupons are paid on 15 June and 15 December each year,and each compounding period has 181 days.The bond has a face value of $100 000 and a yield of 7% p.a.

A) $ \$ 98 \quad 668.76 $
B) $ \$ 98 \quad 595.77 $
C) $ \$ 99 \quad 145.75 $
D) $ \$ 99 \quad 498.14 $

Question

What is the purchase price of a bond bought on 1 March 2005,paying semi-annual coupons of 6.0% p.a.and maturing on 15 June 2007? The coupons are paid on 15 June and 15 December each year,and each compounding period has 181 days.The bond has a face value of $100 000 and a yield of 7% p.a.

A) $ \$ 98  \quad 668.76 $
B) $ \$ 98  \quad 595.77 $
C) $ \$ 99  \quad 145.75 $
D) $ \$ 99  \quad 498.14 $

Quizplus · Accepted Answer

Using equation 6.6,and the information provided in the question,we can find the purchase price of this bond as follows: [3000/(1.035)+ 3000/(1.035)² + 3000/(1.035)³ + 3000/(1.035)⁴ + 1033000/(1.035)⁵] F1F1F1S1F1F1F10 (1.035)^75/181 = $99145.75.

What Is the Purchase Price of a Bond Bought on 1