Gerald is planning to purchase an Australian Treasury bond with a coupon rate (j₂) of 1.03% and face value of $100. The maturity date of the bond is 15 May 2033. Gerald's bond matures at par.

If Gerald purchased this bond on 6 May 2018, what is his purchase price (rounded to four decimal places)? Assume a yield rate of 1.28% p.a. compounded half-yearly, allowing for taxation. Gerald needs to pay tax at rate 24.4% on coupon payments. Assume the tax on coupon is paid immediately on the coupon payment date.

Question 1Answer

a.

$93.7444

b.

$93.5375

c.

$93.5380

d.

$93.1483