On April 24, 2020, you obtained the following information on bonds of ABC Limited:Par value = $1,000, coupon rate 5.75%, maturity date = January 1, 2025, interest payment dates = January 1, July 1.

A Determine the number of days in accrued for this bond.

B Determine the accrued interest on the bond (use 30/360 convention)

C Given that the market yield on the bond on April 24, 2020 was 4.50%, determine full (dirty) price and clean price for ABC bond on this date.

D What price will the bond trade at in the market? Explain

ESuppose on April 24, 2020, you purchased this bond in the market and held this bond for exactly one year (till April 24, 2021). The yield on this bond on April 24, 2021 was 2.25% and you decided to sell the bond. Assume you face 32% marginal tax rate and that 50% of capital gains are taxable. Assume also that coupon interest payments can be reinvested at the annual yield of 3%.

1Determine your gross income and gross return from your investment.

2 Determine your net income and net return from your investment

3 Decompose your net income into its components and comment on your results as a portfolio manager.

Answer rating: 100% (QA)

A Determination of the number of days in accrued for this bond The bonds coupon payment dates are January 1 and July 1 The given valuation date is April 24 2020 The number of days in accrued interest ... View the full answer