Question

Today is 1 July 2020. Joan has a portfolio which consists of two different types of financial instruments (henceforth referred to as instrument A and instrument B). Joan purchased all instruments on 1 July 2014 to create this portfolio and this portfolio is composed of 35 units of instrument A and 46 units of instrument B. Instrument A is a zero-coupon bond with a face value of 100. This bond matures at par. The maturity date is 1 January 2030. Instrument B is a Treasury bond with a coupon rate of j2 = 3.84% p.a. and face value of 100. This bond matures at par. The maturity date is 1 January 2023. (b) Calculate the current price of instrument B per $100 face value. Round your answer to four decimal places. Assume the yield rate is j2 = 3.39% p.a. and Joan has just received the coupon payment.

Select one: a. 102.9900 b. 103.2992 c. 101.2734 d. 101.0700

Answer 1

Working: -

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