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In September, a Firm priced a 6.63% coupon bond maturing on September 15 5th,2033. The bond was issued with a yield to maturity of 6.16%,
In September, a Firm priced a 6.63\% coupon bond maturing on September 15 5th,2033. The bond was issued with a yield to maturity of 6.16%, with first settlement on September 15th,2023. The yield of the new bond was calculated based on a credit spread of +216 bps over the interpolation of the CAN 2.75\% June 1, 2033 and CAN 3.75\% June 1, 2036 bonds. All bonds use the actual/365-day count and are semi-annual pay. a) (5 marks) What was the price of the Firm's bond at the time of issuance to 3 decimal places? Solve for price by calculating the present value of cash flows associated with the bond. Show all work b) (10 marks) The CAN 2.75\% June 1, 2033 bond had a price of 90.459 with a yield of 3.912% when the Firm priced their new bond. What was the yield of the CAN 3.75\% June 1, 2036 when the Firm priced their new bond? Show all work c) (10 marks) What was the clean price of the CAN 3.75\% June 1, 2036 (3 decimal places) when the Firm priced their new bond? Solve for price by calculating the present value of cash flows associated with the bond. Show all work Note: The correct price for Part C will be partly based on your solution to Part B. If your solution to Part B is incorrect, Part C will still be eligible for full marks based on your process and understanding
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