Today is 1 July 2021, Jacob plans to purchase a corporate bond with a coupon rate of j2 = 4.29% p.a. and face value of 100. This corporate bond matures at par. The maturity date is 1 January 2024. The yield rate is assumed to be j 2 = 3.75% p.a. Assume that this corporate bond has a 5.7% chance of default in any six-month period during the term of the bond. Assume also that, if default occurs, Jacob will receive no further payments at all. Calculate the purchase price for 1 unit of this corporate bond. Round your answer to three decimal places. a . 72.808 b. 76.512 c. 100.699 d. 101.788

EBK CONTEMPORARY FINANCIAL MANAGEMENT
14th Edition
ISBN:9781337514835
Author:MOYER
Publisher:MOYER
Chapter6: Fixed-income Securities: Characteristics And Valuation
Section: Chapter Questions
Problem 13P
Question

am. 123.

Today is 1 July 2021, Jacob plans to purchase a corporate bond with a coupon
rate of j2
=
4.29% p.a. and face value of 100. This corporate bond matures at
par. The maturity date is 1 January 2024. The yield rate is assumed to be j
2 = 3.75% p.a. Assume that this corporate bond has a 5.7% chance of default in
any six-month period during the term of the bond. Assume also that, if default
occurs, Jacob will receive no further payments at all. Calculate the purchase price
for 1 unit of this corporate bond. Round your answer to three decimal places. a
. 72.808 b. 76.512 c. 100.699 d. 101.788
Transcribed Image Text:Today is 1 July 2021, Jacob plans to purchase a corporate bond with a coupon rate of j2 = 4.29% p.a. and face value of 100. This corporate bond matures at par. The maturity date is 1 January 2024. The yield rate is assumed to be j 2 = 3.75% p.a. Assume that this corporate bond has a 5.7% chance of default in any six-month period during the term of the bond. Assume also that, if default occurs, Jacob will receive no further payments at all. Calculate the purchase price for 1 unit of this corporate bond. Round your answer to three decimal places. a . 72.808 b. 76.512 c. 100.699 d. 101.788
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