Question 1 (30 marks)

A. Is the price of a short-term security equal to its face value? Explain why? [10 marks]

B. Is the price of a long-term coupon bond equal to its face value? Explain why? [10 marks]

C. On 1st Jan 2021, an investor purchased a $100,000 180-day treasury bill with a yield of 10% p.a. and sold it 30 days later at a yield of 5% p.a.. What would be the discrete holding period return for holding this bill? [10 marks]