Steven is holding 8 untradable bonds with a nominal value of R 1,000,000 with a coupon of 12% and 6 years to maturity. The bond is priced at a premium yield to maturity of 8.75%. This YTM is 25 points above a tradable bond YTM with nominal value of R 1,000,000 with a coupon rate of 11% and 5 years to maturity. Both bonds pay coupons semi-annually. Assume the contract size for the futures is R100,000 and the yield beta is 1.

1.) Calculate YTM for tradable bonds

2.) Given the following durations for both tradable and untradable bonds to be 8.06 & 9.12 respectively calculate the mduration for untradable & tradable Bonds.

3.) How many future contracts do I need to sell short to cover my long position in the untradable bond?

4.) The spot exchange rate is R8/$. If the interest rate in SA and US are 8% and 4% respectively, What is the 6 month forward exchange rate based on covered interest rate parity?