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Problem set 8
Attempt all of these problems before your scheduled tutorial and bring
your attempts with you to class. Round all answers to 3 d.p. where appro-
priate.
1. What is the price of a 6 month T-bill due 8/18/22, if the discount rate
is d = 0.15%, with a t + 1 settlement date, on 2/20/22? How will the
price change if the discount rate increases to 0.2%? Assume $100 face
value.
2. Explain the following concepts: flat price, accrued interest and invoice
price.
3. A bond with face value $1000 and a coupon rate of 7% makes semi-
annual coupon payments on January 15 and July 15 of each year. The
Wall Street Journal reports the ask price for the bond on January 30 at
$1000.625. What is the invoice price of the bond? The coupon period
has 182 days.
(a) TIPs
(b) Callable bonds
(c) STRIPs.
(d) Repo and reverse repo agreements.