(NO EXCEL SOLUTIONS)

1. (15 marks) A bond that pays semi-annual coupons at j2 = 4% has coupon payments of $500.

   The bond is redeemable at 105 on Sept18, 2030.

   1. a) (3 marks) The bond was purchased by Sam Jones on September18 , 2015 at a price P, to

      yield j2 = 5%. Calculate P.

   2. b) (8marks) (i) (5 marks) Generate the first 3 lines (time 0 to 3 inclusive) of the bond amortization schedule. Include your completed partial schedule in your submission, rounding calculated values to the nearest penny.

      (ii) (1 mark) What is the book value adjustment portion of the 7th coupon payment? (iii) (2 marks) What is the book value of this bond on March 18, 2020?

   3. c) (4 marks) Sam sells the bond to another investor on March 18, 2020 (just after the coupon is paid that day) for a quoted price of q =102.7. Using the method of averages, what yield rate, j2 did Sam earn over the time he owned the bond?