Question 7 (8 marks) A large mining company issued a five year index-linked stock on November 1 in 2013. The stock had a nominal coupon rate of 4% per annum, payable half-yearly in arrears and a nominal redemption price of 100%. The actual coupon and redemption payments were index-linked to the Consumer Price Index (CPI) as at the month of payment. Consider a tax-free investor who bought $15,000 nominal of this stock on November 2017 and held the stock until redemption. Some relevant values of the CPI are given below: 2013 2017 2018 May November 170 175 150 160 (a) Calculate the coupon payment that the investor received on May 1 in 2018, and the coupon and redemption payments that the investor received November 1 in 2018. (You may provide expressions for these to receive partial credit). (3 marks) (b) Calculate the real value of the May 1 2018 coupon. (1 mark) (c) Calculate the real value of the final coupon and redemption proceeds. (1 mark) (d) Provide an expression for the real equation of value, and hence for the purchase price paid on November 1 2017, if the effective real interest rate is 2%. (3 marks) Question 7 (8 marks) A large mining company issued a five year index-linked stock on November 1 in 2013. The stock had a nominal coupon rate of 4% per annum, payable half-yearly in arrears and a nominal redemption price of 100%. The actual coupon and redemption payments were index-linked to the Consumer Price Index (CPI) as at the month of payment. Consider a tax-free investor who bought $15,000 nominal of this stock on November 2017 and held the stock until redemption. Some relevant values of the CPI are given below: 2013 2017 2018 May November 170 175 150 160 (a) Calculate the coupon payment that the investor received on May 1 in 2018, and the coupon and redemption payments that the investor received November 1 in 2018. (You may provide expressions for these to receive partial credit). (3 marks) (b) Calculate the real value of the May 1 2018 coupon. (1 mark) (c) Calculate the real value of the final coupon and redemption proceeds. (1 mark) (d) Provide an expression for the real equation of value, and hence for the purchase price paid on November 1 2017, if the effective real interest rate is 2%