Question: 8.2 Bond # 1 2 3 4 1-year strip bond 2-year strip bond 2-year 6% coupon bond 2-year 7% coupon bond Purchase price ($xxxx.xx) 950.00

8.2

Bond #

1

2

3

4

1-year strip bond

2-year strip bond

2-year 6% coupon bond

2-year 7% coupon bond

Purchase price ($xxxx.xx)

950.00

Time 1 cash flow

+1000.00

0

+60.00

+70.00

Time 2 cash flow

0

+1000.00

+1060.00

+1070.00

Yield to maturity (xx.xx%)

5.50%

  1. Based on the information in the given table,

i. What would it cost to buy 1000 units of Bond #3? (1 mark)

ii. What would it cost to buy 60 units of Bond #1? (1 mark)

iii. From part c. above and your answers in part d.i and ii, infer the value of 1060 units of Bond #2. (2 marks)

iv. What is the value of one unit of Bond #2? (1 mark)

v. What is the implied yield of Bond #2? (2 marks)

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