Determine the quoted price and settlement price

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Case: An Australian Commonwealth Government Security (CGS) has a maturity date of 21 December 2026 and pays coupons semi-annually on the 21 st of the relevant coupon payment month. The CGS has a coupon rate of 6% per annum. You purchase the bond with a settlement date of 19 June 2023 and a yield to maturity of 4% per annum. Please use semi-annual compounding when answer the following questions.

Question 1: Determine the quoted price, settlement price and accrued interest of the bond.

Question 2: You can reinvest your coupons at a semi-annual rate of 1%. If interest rates do not change over the next two years, what is the holding period return of the bond if you hold it for two years?

Reference no: EM133491971

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