Question 7 A government issued a number of index-linked bonds on 1st September 2017 which were redeemed on 1st September 2019. Each bond had a nominal coupon rate of 4% per annum, payable half-yearly in arrears, and a nominal redemption price of 115%. The actual coupon and redemption payments were indexed by reference to the value of the retail price index with a time lag of 6 months. The values of the retail price index during the relevant years were: March September March September 2017 2017 2018 2018 130 133.8 137.8 140.4 Date RPI March 2019 143 September 2019 146.9 An investor purchased 5,000 nominal at the issue date, and held it until it was redeemed. The issue price was 110 per 100 nominal. (i) Calculate all the investor's cash flows from the bond and state the date when each occurs. [10 marks] (ii) Hence, or otherwise, calculate the gross annual effective yield achieved by the investor on this investment. [6 marks]