Suppose the Bank of England's repo rate is 4.5% and the financial pages in the newspaper contain the following information: [Tripos 2006] UK GILTS Interest Redemption yield yield Tr 72pc '06 7.32 4.31 Tr 43 4pc '10 4.65 4.22 Tr 8pc '15 6.09 4.09 Tr 4'4pc '55 3.76 3.68 (a) Compute the price of the 712pc '06 Treasury gilt per 100 face value. Explain how this gilt price is likely to be affected if the Bank of England reduced the repo rate by 25 basis points.