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(a) Jocelyn has just bought a 4% bond that pays quarterly coupons with $1,000 face value and 5 years to maturity. i) If the yield
(a) Jocelyn has just bought a 4% bond that pays quarterly coupons with $1,000 face value and 5 years to maturity. i) If the yield (APR) of the bond was 6%, what was its purchase price? (3 marks) ii) If the bond's YTM (APR) drops to 5% six months later and Jocelyn sells it immediately after receiving the coupon for the quarter, calculate the 6-month capital gains yield. (5 marks) iii) Suppose the bond Jocelyn purchased was a semi-annual coupon bond (instead of a quarterly coupon bond), could the 6-month total yield be computed as the sum of the current yield and the 6-month capital gains yield? Explain
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