Nominal value and bond price

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a) Calculate the price of a bond with nominal value K1,000 maturity 5 years and coupon rate 6.2%; for the following values of yield to maturity:

i. 4.5%

ii. 6.2%

b) Compare the values of yield to maturity to the coupon rate and explain the relationship that exists between nominal value and bond price.

c) On the 01/09/2008 an investor is purchasing a bond from a seller; the last coupon on the bond was paid on the 01/ 05/2008 and the maturity date is 01/ 05/2012. The bond has a coupon rate of 10% and nominal value K1, 000. The yield to maturity is equal to 8%.

i. Determine the dirty price paid by the buyer.

ii. Calculate the accrued interest.

Note: assume 30 days per month.

d) Suppose an investment asset has a spot price of K25 and it is due to pay a fixed dividend of K2 in three months' time. The asset costs 1% per annum to store. Threemonth (exactly 0.25 year) interest rates are 5.85% and six-month (0.5 year) interest rates are 6%. What is the fair six-month forward price for the asset? Input your answer to two decimal places.

Reference no: EM133048729

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