Explain the penny purchase price

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Penny bought a Treasury bond with a coupon rate of j2 =2.42% p.a. and face value of $100. The bond will mature on 15 October 2028. Penny purchased this bond on 12 January 2020.

(a) If Penny's purchase price is $98.57, which of following statement is incorrect.

a.Penny can find the her yield rate by using the linear interpolation approach

b.Penny can use the approximate bond yield formula to accurately estimate her yield rate

c.Base on the given information (purchase date, purchase price, maturity date, coupon rate of 2.42% p.a. payable half yearly ), Penny can not calculate the modified duration of this bond

d.Penny can the Excel Goal Seek tool to find her yield rate

(b) What was Penny's purchase price (rounded to five decimal places)? Assume a yield of 4.24% p.a., compounded half-yearly.

a.87.38715

b.87.38197

c.86.19012

d.86.76489

Reference no: EM133062558

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