September 2028 commonwealth government security

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Please use graphs and/or tables to support your discussion and cite any references.

Consider a 4% coupon September 2028 Commonwealth Government Security (CGS) with a required yield of 3% that has a settlement date of Monday 10 March 2020.

a) Determine the quoted price, settlement price and accrued interest of the bond.

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

c) Using duration, estimate the price of the bond if all interest rates increase by 50 basis point on Monday March 10 2020.

Reference no: EM132589743

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