Explain bond third year cash flow to a third party

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Assume that you are a bond dealer. You buy a 3.5 year bond, with a coupon of 11.75% and a YTM of 11.71%. The par value is $100.

The following spot curve is in effect.

Time in Years

Time in Periods

Theoretical Annual Spot Rate

0.5

1

8.00%

1

2

8.30%

1.5

3

8.93%

2

4

9.25%

2.5

5

9.47%

3

6

9.79%

3.5

7

10.13%

You want to sell the bond's third year cash flow to a third party. You are only selling one cash flow! This is the cash flow that occurs at the end of three years.

What will you charge for it? (Round to two digits, e.g. 12.4562 would be 12.46, and do not include a dollar sign).

Reference no: EM133068569

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