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Calculate the price of the same bond

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Reference no: EM132972153

Question - A bond with a maturity of 3 years has the following characteristics: the face value is F = £100, the coupon rate is 8% p.a. and YTM (yield to maturity) is 11%.

a) Knowing that the coupon is paid semi-annually, calculate the price of the bond with semi-annual discrete compounding.

b) Calculate the price of the same bond from a) with quarterly discrete compounding.

c) Based on your results from a) and b) how is the price of the bond changing when the compounding frequency is changing? Justify your answer.

Reference no: EM132972153

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