Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Biti Bank purchase a $4,000 bond that pays11% pacompounded half-yearly and is redeemable in exactly 11 years. The price paid will yield the bank5% pacompounded

Biti Bank purchase a $4,000 bond that pays11% pacompounded half-yearly and is redeemable in exactly 11 years. The price paid will yield the bank5% pacompounded half-yearly if held to maturity. Biti Bank hold this bond for 6 years before coming to a decision that the bond should be sold. They decide to sell to ZNZ Bank at5.2% pacompounded half-yearly.

a)Calculate the price (PB) that Biti Bank paid to purchase the bond. Give your answer in dollars and cents to the nearest cent.

PB= $

b)Calculate the price (PZ) that ZNZ Bank paid to purchase the bond. Give your answer in dollars and cents to the nearest cent.

PZ= $

c)Calculate the nominal annual yield compounded half-yearly that Biti Bank realised. You may give your answer as a percentage per annum to the nearest percent or use linear interpolation or a financial calculator to give a more accurate result.

Yield =% pa

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Fundamentals of Futures and Options Markets

Authors: John C. Hull

8th edition

978-1292155036, 1292155035, 132993341, 978-0132993340

More Books

Students also viewed these Finance questions