Question
Today is 1 July 2020. Joan has a portfolio which consists of two different types of financial instruments (henceforth referred to as instrument A and
Today is 1 July 2020. Joan has a portfolio which consists of two different types of financial instruments (henceforth referred to as instrument A and instrument B). Joan purchased all instruments on 1 July 2011 to create this portfolio and this portfolio is composed of 36 units of instrument A and 42 units of instrument B. Instrument A is a zero-coupon bond with a face value of 100. This bond matures at par. The maturity date is 1 January 2030. Instrument B is a Treasury bond with a coupon rate of j2 = 3.35% p.a. and face value of 100. This bond matures at par. The maturity date is 1 January 2023.
(a) Calculate the current price of instrument A per $100 face value. Round your answer to four decimal places. Assume the yield rate is j2 =2.00% p.a.
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