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Today is August 18, 2020. Chang wants to buy a $190000 face value bond that has a coupon rate of 7.25% (comp. semi.) and that
"Today" is August 18, 2020. Chang wants to buy a $190000 face value bond that has a coupon rate of 7.25% (comp. semi.) and that pays its coupons June 30 and December 31 every year. The bond matures on Dec 30, 2039, and the current interest rate is 7.25% (comp. semi.). a) What is the amount of each coupon payment? b) Find the clean price Po of the bond on June 30, 2020. c) Use the ACT/ACT daycount convention to calculate the fraction k of the current coupon period based on "today's" date. d) Find the dirty price "today" using the linear approximation P= P. * (1 + ik). (Where i is the effective 6 month rate and k is the fraction from part c).) e) Find the dirty price "today" using the compound interest formula P= Po *(1 + )k. (Where i is the effective 6 month rate and k is the fraction from part c).)
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