Question 3 (8 marks) Read the scenario below and answer the questions that follow: An investor purchases a semi-annual 12% coupon paying bond with a par value of R40 000 000, selling at a clean price of R114.90163% on 25 June 2021. Coupon payments are made on 15 March and 15 September, and the register closes 10 days prior to the coupon payments becoming due on 5 March and 5 September. The maturity date of the bond is 15 March 2030. The yield to maturity (YTM) on the bond is 9.5%. The bond¡¦s modified duration is 5.97 years. Note: show all calculations and round off your final answers to two decimal places. 3.1 Is the bond trading at par, discount or premium? (1) 3.2 Calculate the current yield on the bond. (1) 3.3 Is the bond trading cum-interest or ex-interest? (1) 3.4 Calculate accrued interest on the bond. (1) 3.5 Determine the all-in price of the bond. (1) 3.6 Calculate the total consideration that the investor should pay. (1) 3.7 What is the percentage change in the bond price if YTM increases by 150 basis points (pts)? (1) 3.8 Interpret the bond¡¦s modified duration value of 5.97 years. (1).
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