GrandLtd hasissueda3-year bond withaface value of $1000 and whichpays acoupon of 6.10%p.a..Coupon payments are made semi-annually. Assumeayieldtomaturity of 5.80%p.a.

a)Calculate the value of thebond.

b)Calculate the effective annual yield(EAY)of thebond. (As apercentage to two decimal places)

c)Suppose you bought100bonds at the price you indicatedin a)above. After oneyear,immediately after the 2ndcoupon payment, yousellthe bonds atayield of 6.1%p.a..

PREMIUM

Why?

 

Calculate the price (per bond) you obtained from thesale.