Question
Julie buys a bond with a face value of $100, a time to maturity of three years, a coupon of 6% pa with semi-annual payments
Julie buys a bond with a face value of $100, a time to maturity of three years, a coupon of 6% pa with semi-annual payments and a yield of 7% pa. Six months later (immediately after the first coupon has been paid), the Reserve Bank of Australia unexpectedly cuts the cash rate. The yield on Julie's bond drops to 5% pa and she decides to sell. Calculate the selling price and the dollar profit or loss Julie has made on selling the bond, outlining why this profit or loss has occurred.
I know that another person ask the same question but I don't get the same solution. Can you write me the formula of the calculations?
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