Question
Julie buys a bond with a face value of $100, a time to maturity of ten years, a coupon of 3% pa with semi-annual payments
Julie buys a bond with a face value of $100, a time to maturity of ten years, a coupon of 3% pa with semi-annual payments and a yield of 0.96% pa. Four years later (immediately after the eighth coupon has been paid), the Reserve Bank of Australia unexpectedly increases the cash rate. The yield on Julie's bond increases to 1.44% pa and she decides to sell.
Required
Calculate the selling price and the dollar profit or loss Julie has made on selling the bond (ignore coupons), outlining why this profit or loss has occurred.
(In dollars and cents accurate to the nearest cent)
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