Question: Problem 1 (Required, 25 marks) We consider a 7-year straight term bond issued currently. It has face value F = $1500 and redemption value C

Problem 1 (Required, 25 marks) We consider a 7-year straight term

Problem 1 (Required, 25 marks) We consider a 7-year straight term bond issued currently. It has face value F = $1500 and redemption value C = $1800. The annual coupon rate is 7% payable quarterly. The current annual effective yield rate is 6.1364%. (a) Find the current price of the bond. (b) Suppose that the bond price has raised by $66.9 after 2 years, find the annual effective yield rate of the bond at that time using Newton's method. Show all details. Problem 1 (Required, 25 marks) We consider a 7-year straight term bond issued currently. It has face value F = $1500 and redemption value C = $1800. The annual coupon rate is 7% payable quarterly. The current annual effective yield rate is 6.1364%. (a) Find the current price of the bond. (b) Suppose that the bond price has raised by $66.9 after 2 years, find the annual effective yield rate of the bond at that time using Newton's method. Show all details

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