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Question 3 [9 marks]. A 2-year bond has face value 700,000 semi-annual coupons at rate 3% per annum, and is redeemable at half par.

Question 3 [9 marks]. A 2-year bond has face value 700,000 semi-annual coupons at rate 3% per annum, and is redeemable at half par. The current rate of interest is 3% compounded continuously. (a) Determine the coupon and redemption payments in pounds. (b) Determine the no-arbitrage price of the bond to the nearest pound.

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