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Homework answers / question archive / Jolene buys a bond with a face value of $100, a time to maturity of ten years, a coupon of 3% pa with semi-annual payments and a yield of 0

Jolene buys a bond with a face value of $100, a time to maturity of ten years, a coupon of 3% pa with semi-annual payments and a yield of 0

Finance

Jolene buys a bond with a face value of $100, a time to maturity of

ten years, a coupon of 3% pa with semi-annual payments and a yield of 0.96% pa. Four year's later (immediately after the eighth coupon has been paid), the Reserve Bank of Australia unexpectedly increases the cash rate. The yield on Julie's bond increases to 1.44% pa and she decides to sell.
 
Required
Calculate the selling price and the dollar profit or loss Jolene has made on selling the bond (ignore coupons when calculating the profit), outlining why this profit or loss has occurred.

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