Consider a government bond that pay:
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Consider a government bond that pays coupon semi-annually on 15 February and 15 August each year, where the annual
coupon rate is 7%. The face value of the bond is $100 and the bond is redeemable at par on 15 August 2030. If the current
date is 27 March 2021 and the bond yield is quoted as 7.5% per annum compounded semi-annually, calculate the market
price (which is also known as the clean price) with the help of the RBA formula.
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