2 4. (Flat price, Accrued interest, Full price) a) A two-year bond was issued on 10th January, 2017 with a par value of $100. The bond pays a coupon of 8% half-yearly. The first coupon is due on 10th July 2017, the next on 10th January 2018, the third on 10th July 2018, and the final one is paid along with principal at maturity date on 10th January 2019. The market discount rate is equal to the coupon rate and so the flat price is 100. An investor wants to purchase the bond on 31st May, 2017. What is the full price he must pay? b) A 5% corporate bond is priced for settlement on 14 July 2015. The bond makes semi- annual coupon payments on 1 March and 1 September of each year and matures on the 1st September 2020. Assuming a 30/360 day count convention for accrued interest, calculate the full price, the accrued interest, and the flat price per EUR 100 of par value for the yield-to- maturity 5.10%