The Government of Canada auctioned a new benchmark 2 year bond, to settle on October 2nd,...
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The Government of Canada auctioned a new benchmark 2 year bond, to settle on October 2nd, 2020. The bond has a maturity of November 1st, 2022. Assume the bond pays coupons semi-annually and has an actual/365days day count convention. a) (4 pts) Using the information above, what was the average clean price for the 2 year bond? How much accrued interest was there on the bond on October 2nd, 2020? b) (4 pts) The Bank of Canada calls you and asks: "Please advise us on how to achieve a 2 year outstanding benchmark bond issue of $10 billion (currently it is $6 billion). Furthermore, we would like to offer the new bonds at an average yield to maturity of 0.50%. What is the average clean price to offer the 2 year bond in this case? Assume the next auction settles on October 27th, 2020. Term Coupon Issue Average Average Rate Amount Price Low High Auction Yield Yield Yield Coverage 2Y 0.25% 6 billion ? 0.274 0.270 0.275 3.032 The Government of Canada auctioned a new benchmark 2 year bond, to settle on October 2nd, 2020. The bond has a maturity of November 1st, 2022. Assume the bond pays coupons semi-annually and has an actual/365days day count convention. a) (4 pts) Using the information above, what was the average clean price for the 2 year bond? How much accrued interest was there on the bond on October 2nd, 2020? b) (4 pts) The Bank of Canada calls you and asks: "Please advise us on how to achieve a 2 year outstanding benchmark bond issue of $10 billion (currently it is $6 billion). Furthermore, we would like to offer the new bonds at an average yield to maturity of 0.50%. What is the average clean price to offer the 2 year bond in this case? Assume the next auction settles on October 27th, 2020. Term Coupon Issue Average Average Rate Amount Price Low High Auction Yield Yield Yield Coverage 2Y 0.25% 6 billion ? 0.274 0.270 0.275 3.032
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Answer a 1 Calculate the first coupon payment Coupon payment 100 x 00025 2 0125 2 Calculate the seco... View the full answer
Related Book For
Financial Management for Decision Makers
ISBN: 978-0138011604
2nd Canadian edition
Authors: Peter Atrill, Paul Hurley
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