Emma buys a bond with a face value of $100, a time to maturity of 5 years, a coupon of 2% pa with semi-annual payments, and a yield of 2.4% pa. Three year's later (immediately after the sixth coupon has been paid), the Reserve Bank of Australia unexpectedly decreases the cash rate. The yield on Julie’s bond decreases to 1.2% pa and she decides to sell.

Required

Calculate the buying and selling prices. Discuss why the price has changed.

Answer rating: 100% (QA)

E mme larly E100 nS D 2Pa C... View the full answer