Karl is planning to purchase a Treasury bond paying a (j₂) coupon rate of 4.9% p.a. The face value of the bond is $100. Its maturity date is 15 March 2033; the bond matures at par.

If Karl purchased this bond on 5 March 2020, what is his purchase price (rounded to four decimal places)? Assume a yield rate of 7.89% p.a., compounded half-yearly. Karl needs to pay 25% of coupon payments and capital gains in tax. Assume that all tax payments are delayed by a half-year.

Answer

a.

$78.1928

b.

$59.4265

c.

$65.1438

d.

$63.1083