Do all 3 parts Its 1 July 2020. Greg is planning to purchase a corporate bond with a coupon rate of j 2 = 1.68% p.a. and face value of 1000. This corporate bond matures at par. The maturity date is 1...

Its 1 July 2020. Greg is planning to purchase a corporate bond with a coupon rate ofj
₂ = 1.68% p.a. and face value of 1000. This corporate bond matures at par. The maturity date is 1 July 2022. The yield rate is assumed to bej
₂ = 6.15% p.a. Assume that this corporate bond has a 3.69% chance of default in the first six-month period (i.e., from 1 July 2020 to 31 December 2020) and this corporate bond has a 3.01% chance of default in any six-month period during the term of the bond except the first six-month (i.e., 3.01% chance of default in any six-month from 1 January 2021 to 1 July 2022). Assume also that, if default occurs, Greg will receive no further payments at all.

Australian bonds

(a)    What is the expected coupon payment on 1 January 2021?

a.

7.8487

b.

8.1472

c.

8.0900

d.

7.8465

(b)    What is the expected coupon payment on 1 January 2022?

a.

6.9494

b.

7.8465

c.

7.6103

d.

7.5570

(c) Calculate the purchase price of this corporate bond. Round your answer to two decimal places.

a.

876.976

b.

862.321

c.

807.187

d.

909.652