On 15 January, 2021, you bought a Government bond, with a face value of $1,000; a term to maturity of 5 years; a coupon rate of 6% per annum payable yearly, and a yield to maturity of 5% per annum. You paid the market price of $1,043.76 for the bond. On 15 January, 2022, you sold the bond to Jill, providing her with a yield to maturity of 4% per annum. [NOTE: You bought and sold the bond immediately after payment of the interest coupon due on 15 January each year – that is, the interest payments due on 15 January in 2021 and 2022 are not included in the bond prices.]
REQUIRED: i. What price would Jill have paid for the bond? [Show answer correct to the nearer cent.]
ii. What is your holding period return for holding the bond for one year, receiving the January, 2022 interest coupon, then selling the bond? [Show answer as a percentage, correct to 2 decimal places.]

Answer rating: 100% (QA)

i Amount paid by the Jill is the selling price of bond We will calculate price of bon... View the full answer