Question: Consider a bond with $1,000 par value, 6.875% coupon rate to be paid semiannually, YTM=1.5%. Suppose that the maturity of this bond is Aug 15,2025,

Consider a bond with $1,000 par value, 6.875% coupon rate to be paid semiannually, YTM=1.5%. Suppose that the maturity of this bond is Aug 15,2025, and you are valuing the bond for settlement on January 18, 2022. The next coupon is due Feb 15, 2022. Assume a 30E/360 day count convention (30 days in January and 180 days in 6 months). All transactions take place at the end of the day.

Based on information given answer the following questions:

a) Calculate the current bond Present Value (Full Price) and clean price of the bond.

b) Calculate how many bonds you need to purchase in order make a $10,000 purchase. Round off to the closest whole number.

c) Calculate the bond’s Macaulay Duration.

d) Using the Duration to estimate the impact on bond price if there is an increase in interest rate of 0.25%

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To calculate the bonds present value and clean price we need to follow these steps Step 1 Determine the number of periods until maturity The bond matures on August 15 2025 and we are valuing it on Jan... View full answer

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