Question

Today is 1 July 2018. Matt is 30 years old today. Matt has a portfolio which consists of three Treasury bonds (henceforth referred to as bond A, bond B and bond C). There are 200 units of bond A, 300 units of bond B and 500 units of bond C. Bond C is a Treasury bond which matures on 1 January 2021. One unit of bond C has a coupon rate of j2 = 3.35% p.a. and a face value of $100. Matt purchased this Treasury bond on 1 January 2018. The purchase yield rate was j2 = 3.4% p.a. and the purchase price of one unit of bond C is $99.86. Find the sale price of one unit of bond C

Answer 1

	Face value of bond C	$100
	Coupon rate	3.35% (0.0335)	Annual Coupon payment	$3.35	(0.0335*100)
			Purchase date,January 1,2018	Purchase Price=$99.86
			Yield =3.4%	0.034
			Todays Date= July 1,2018
	year	Date	Cash flow:	Present Value of Cash Flow as on Jan1.2019
	0	.January 1, 2019	$3.35	$3.35
	1	.January 1, 2020	$3.35	$3.24	(3.35/1.034)
	2	.January 1, 2021	$3.35	$3.13	(3.35/(1.034^2)
	2	.January 1, 2021(Maturity payment)	$100.00	$93.53	(3.35/(1.034^2)
			SUM	$103.25
			Market Price on January 1, 2019	$103.25
	9.5 Months	March 15,2018	Market Price on July1, 2018	$                                   101.53	(103.25/(1+(0.034*(6/12))
			Sale Price of 1 unit of Bond C	$                                   101.53