An institutional investor, Gilbert Limited, is planning to purchase a straight Eurobond in order to include it in the investment portfolio. Gilbert receives following information:

Current Eurobonds in the Euromarkets are trading at a yield of 10.50% annually

An existing Eurobond with a face value of USD 2 million pays annual fixed 8.50% coupons

The bond Gilbert is considering will mature on 31 December 2022.

i. If Gilbert purchases the bond on 15 June 2019 and the last coupon on the bond was paid on 31 December 2018, what should be the price that Gilbert should pay for this bond? [4 marks]