Question 6

Jolene buys a bond with a face value of $100, a time to maturity of ten years, a coupon of 3% pa with semi-annual payments and a yield of 0.96% pa. Four year's later (immediately after the eighth coupon has been paid), the Reserve Bank of Australia unexpectedly increases the cash rate. The yield on Julie's bond increases to 1.44% pa and she decides to sell.

Required

Calculate the selling price and the dollar profit or loss Jolene has made on selling the bond (ignore coupons when calculating the profit), outlining why this profit or loss has occurred.

(In dollars and cents accurate to the nearest cent)

Please show the manual formula that you use (not calculate in excel)