You are currently working as a bond trader for JB Who Investment Bank. The Reserve Bank has just increased interest rates and a client is requesting a quote for the cash price of a particular bond. Your screen below displays the new zero interest rates with continuous compounding.
Maturity
(months) Zero rate
(% pa)
3 10.70
6 11.40
9 11.70
12 12.50
15 12.80
The bond has a coupon rate of 12% pa paid quarterly and a face value of $100. The bond matures in 15 months. Using the rates above, calculate the bond price. Give your answer in dollars and cents to the nearest cent.
Bond price= ?
