Question: Note: Correct answer to calculations-based questions will only be awarded full mark if clearly stated numerical formula (including the left-hand side of the equation)

Note: Correct answer to calculations-based questions will only be awarded full mark if clearly stated numerical formula (including the left-hand side of the equation) is provided. Correct answer without calculations support will only receive a tiny fraction of mark assigned for the question. Question 1 (11 marks) On 1 April 2024, you've just purchased a 10-year bond issued by MTR Corporation to finance the future railway development. The bond has a face value of $1,000 and carries 8% coupon, paid semi-annually. The yield of the bond is (APR) 10%, compounded semi-annually. (a) How much did you pay to buy the bond on 1 April 2024? (b) Is the bond a par bond, discount bond or premium bond? Explain. (4 marks) (2 marks) (c) On 31 March 2025, the bond becomes a par bond as its yield has decreased from (APR) 10% to (APR) X%, compounded semi-annually. (i) What is the value of X? Explain. (2 marks) (ii) If you sell the bond immediately after receiving the (second) coupon, calculate the capital gain yield. (3 marks)

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