Today is 1 July 2019. Jenny purchased all instruments on 1 July 2017 to create this portfolio at purchase rate of
j2 = 3.45% and she plans to sell the whole portfolio today at a sale yield rate of j2 = 3.3% p.a. Given that Jenny received the coupon payments before the sale.
Instrument B is a Treasury bond with a coupon rate of j2 = 3.08% p.a. and face value of 100. This bond matures at par. The maturity date is 1 January 2021.
a) Calculate the purchase price of instrument B per $100 face value on 1 July 2017. Round your answer to four decimal places.
b) Use the previous results and given information to calculate the holding period yield rate of one instrument B. Assume the reinvestment rate is j2 = 3.5% p.a. from the start of July 2017 to the end of June 2018 and j2 = 3.35% p.a. from the start of July 2018 to the end of June 2019. Express your answers as a j2 percentage rate and round your answers to one decimal place.
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