(a) A bond with a redemption value of $100 pays coupons of $1.50 semi-annually, with the first coupon due in half a year. The bond will mature in ten years’ time. It is currently selling for $95.25. Show that the yield to maturity is 3.6% p.a.
(b) A zero-coupon bond is redeemable for $100 in twelve years’ time. Its yield to maturity is also 3.6%. Compute its current price.