Calculate Georg's purchase price.

EBK CONTEMPORARY FINANCIAL MANAGEMENT
14th Edition
ISBN:9781337514835
Author:MOYER
Publisher:MOYER
Chapter6: Fixed-income Securities: Characteristics And Valuation
Section: Chapter Questions
Problem 13P
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Today is 1 July, 2022, Georg plans to purchase a corporate
bond with a coupon rate of j₂ = 6.09% p.a. and a face value
of $100. This corporate bond matures at par. Its maturity
date is 1 January, 2025. The yield rate is assumed to be j2 =
4% p.a. Assume that this corporate bond has a 5% chance
of default in any six-month period during its term. Assume,
also, that, if default occurs, Georg will receive no further
payments at all. Calculate Georg's purchase price. Round
your answer to three decimal places.
a.
$105.413
O b. $79.625
O c. $104.208
O d. $82.447
Transcribed Image Text:Today is 1 July, 2022, Georg plans to purchase a corporate bond with a coupon rate of j₂ = 6.09% p.a. and a face value of $100. This corporate bond matures at par. Its maturity date is 1 January, 2025. The yield rate is assumed to be j2 = 4% p.a. Assume that this corporate bond has a 5% chance of default in any six-month period during its term. Assume, also, that, if default occurs, Georg will receive no further payments at all. Calculate Georg's purchase price. Round your answer to three decimal places. a. $105.413 O b. $79.625 O c. $104.208 O d. $82.447
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